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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended July 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 000-20759
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AMERICAN ARTISTS FILM CORPORATION
(Name of small business issuer in its charter)
MISSOURI 43-1717111
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1245 FOWLER ST., N.W.
ATLANTA, GEORGIA 30318
(Address of principal executive offices) (Zip code)
Issuer's telephone number (404) 876-7373
Securities registered under Section 12(b) of the Exchange Act:
NONE
Securities registered under Section 12(g) of the Exchange Act:
CLASS A COMMON STOCK, $.001 PAR VALUE PER SHARE
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [ ]
State issuer's revenues for its most recent fiscal year: $3,890,592
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and ask prices of such stock, as of the close of business on October 29,
1997: There were 287,646 shares of Class A, $.001 par value, common stock held
by non-affiliates; however, a trading market has not developed for the Class A
common stock. There is no established market for the Class B common stock,
$.001 par value.
State the number of shares outstanding of each of the issuer's class of
common equity: 912,984 shares of Class A common stock, $.001 par value per
share and 5,502,277 shares of Class B common stock, $.001 par value per share
were outstanding as of October 29, 1997.
Documents incorporated by reference: NONE
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AMERICAN ARTISTS FILM CORPORATION
FORM 10-KSB
TABLE OF CONTENTS
PART I Page
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Item 1. Description of Business............................ 3
Item 2. Description of Property............................ 9
Item 3. Legal Proceedings.................................. 9
Item 4. Submission of Matters to a Vote of Security Holders 9
PART II
Item 5. Market for Common Equity and Related
Stockholder Matters................................ 10
Item 6. Management's Discussion and Analysis or Plan
of Operation....................................... 10
Item 7. Financial Statements............................... 15
Item 8. Changes In and Disagreements With Accountants
on Accounting and Financial Disclosures............ 15
PART III
Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a)
of the Exchange Act................................ 15
Item 10. Executive Compensation............................. 17
Item 11. Security Ownership of Certain Beneficial
Owners and Management.............................. 18
Item 12. Certain Relationships and Related
Transactions....................................... 19
Item 13. Exhibits and Reports on Form 8-K................... 22
SIGNATURES.......................................................... 25
INDEX TO FINANCIAL STATEMENTS ...................................... F-1
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
INTRODUCTION
American Artists Film Corporation (the "Company"), organized in July 1995 as
a Missouri Corporation under the name Setab Alpha, Inc., is the successor by
merger of a Georgia corporation named American Artists Film Corporation that was
founded in July 1991. The Georgia corporation is sometimes referred to herein
as "Old American Artists"; the Missouri corporation prior to the merger is
sometimes referred to herein as "Setab." Unless otherwise indicated by the
context, as used herein, the term "the Company" includes its predecessors and
subsidiaries, and discussion of the business and operations of the Company
include those of Old American Artists; Setab had no business operations prior
to the merger with Old American Artists.
The Company is engaged in the production of television commercials, the
development and production of television specials and related properties, and
the development of feature-length motion picture screenplays and other media
products for possible future production or license. The Company classifies its
operations into two business segments: (i) film development and production, and
(ii) commercial contract production (See Note 7 of the Notes to Consolidated
Financial Statements for financial information on the Company's business
segments). Additionally, during fiscal 1997, the Company incurred developmental
and organizational expenses for a new business segment focused on the
development and operation of a network of Large Screen Video Display operations.
The Company's executive offices are located at 1245 Fowler Street, N.W.,
Atlanta, Georgia 30318, and its telephone number is 404-876-7373.
BACKGROUND
Old American Artists was founded in 1991. In August 1993 the Company
acquired all of the outstanding capital stock of First Light Entertainment
Corporation ("First Light"), a television commercial producer. In June 1994 the
Company subscribed for 49% of the outstanding capital stock of Diversity
Filmworks, Inc. ("Diversity"), formerly First Light Diversity, Inc., a
television commercial producer organized and 51%-owned by Tyrone C. Johnson.
On October 7, 1996, Setab completed a public offering (the "Public Offering")
of 700,000 shares of its Class A common stock, par value $.001 per share (the
"Class A common stock"). The net proceeds of its Public Offering were $15,477,
which Setab used to pay existing liabilities.
In May 1996 Setab entered into an agreement ("Merger Agreement") with Old
American Artists for the merger (the "Merger") of Setab and Old American
Artists. The Merger was consummated on October 7, 1996 (the "Merger Date") and
Setab, as the surviving corporation, subsequently changed its name to American
Artists Film Corporation.
By reason of the Merger, the stockholders of Old American Artists became
shareholders of the surviving corporation, the separate existence of Old
American Artists ceased and the business and management of Old American Artists
became the business and management of the Company. Each of the 9,407,837
outstanding shares of Old American Artists common stock became 0.5862 shares of
the capital stock of the Company, with the first 100 shares issued to each Old
American Artists shareholder as Class A common stock, $0.001 par value per share
and the remainder as Class B common stock, $0.001 par value per share (the
"Class B common stock"); outstanding options and warrants to purchase an
aggregate of 3,840,328 shares of common stock of Old American Artists became
options and warrants to purchase an aggregate of 2,251,200 shares of Class B
common stock. The effects of this exchange ratio have been retroactively
applied to the earliest periods presented for all share and per share amounts
related to the Company's outstanding common stock, stock options and warrants.
As a result of the consummation of the Merger, the Old American Artists
shareholders held, immediately following the Merger Date, 88.7% of the
outstanding capital stock of the Company (including all of the outstanding
shares of Class B common stock), and the pre-Merger shareholders of Setab
(including those persons who purchased Class A common stock in the Public
Offering) held the remaining 11.3% of the capital stock of the Company. Each
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share of Class B common stock is convertible at any time at the election of the
holder into one share of Class A common stock. The Class A common stock and the
Class B common stock are identical in all respects and the holders thereof will
have equal rights and privileges, except with respect to the election of
directors. In the election of directors, holders of Class B common stock, voting
as a separate class, are entitled to elect a number of directors equal to the
greater of (i) the number (rounded to the nearest whole number) that bears to
the total number of directors of the Company the same ratio that the number of
outstanding shares of Class B common stock bears to the aggregate number of
outstanding shares of Class A and Class B common stock, or (ii) the smallest
number of directors that constitutes a majority of the Board of Directors.
Holders of Class A common stock voting as a separate class will be entitled to
elect all of the other members of the Board of Directors.
Pursuant to the Merger Agreement, for a period of 365 days after the Merger
Date, none of the shares of Class A or Class B common stock received in the
Merger, the shares of Class B common stock issued upon exercise of options and
warrants outstanding at the Merger Date, or shares of Class A common stock
issued upon conversion of Class B common stock issued in the Merger, could be
sold, transferred or otherwise disposed of without the prior written consent of
the Company prior to October 1997.
BUSINESS OF THE COMPANY
Film Development and Production
Since its organization by Steven D. Brown and Rex Hauck in July 1991, the
Company's activities have consisted primarily of producing network television
specials, developing other television specials for possible future production,
developing various feature-film screenplays and treatments for possible future
production, and seeking to arrange financing for production and exploitation of
one or more of its feature-film properties. During fiscal 1997, the Company re-
aligned its television and film activities into a separate division called
American Artists Films.
Fire From The Sky. In 1997 the Company co-produced with Turner Original
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Productions, Inc. ("TOP") a one-hour special titled "Fire From The Sky." This
special was initially broadcast on the TBS Superstation ("TBS") in March 1997
and has been subsequently re-broadcast on TBS and The Cable News Network
("CNN"). Under the production agreement ("Production Agreement") with TOP,
dated October 11, 1996, as amended on November 13, 1996, the Company received
production fees amounting to $368,100 for the production of this special. The
terms of the Production Agreement also call for a limited participation by the
Company in any foreign revenues. Through fiscal 1997 the Company has not
recognized any foreign revenues related to this limited participation.
Angels. In 1994 the Company produced with Greystone Communications, Inc.
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("Greystone"), two 2-hour prime time specials for the NBC television network:
"Angels: The Mysterious Messengers," hosted by Patty Duke, and "Angels II:
Beyond the Light," hosted by Stephanie Powers. Both programs were initially
licensed to NBC, which aired the first program twice and the second program
once. NBC's rights to further airings expired in November, 1996.
The Company also entered a 3-year agreement ("Haber Agreement") in July 1994
with Alfred Haber Distribution, Inc. for foreign distribution of the Angels
programs. Under that agreement the Company and Greystone receive 75% of any
license fees, less expenses, obtained from licensing the Angels programs outside
the United States. License fees have now been received for television, cable
and satellite broadcasts of the programs in more than 55 countries. The Haber
Agreement expired in August 1997 and was extended for an additional eighteen
month period through January 1999.
Under a May, 1994 agreement, Calling Card Company, Inc. ("CCC") marketed home
videos of the Angels programs through advertising during the NBC network
broadcast, providing royalties, which were shared by NBC, the Company and
Greystone, of $223,000 through July 31, 1997. In addition, a video edition of
the first Angels program has been separately marketed by Time-Life Video under
an August 1994 agreement which granted Time-Life exclusive home-video rights to
the program in the United States and Canada for a five-year term. The agreement
provided for $100,000 in non-refundable advance royalties and guaranteed minimum
royalties of $10,000 per year for the duration of the agreement after recoupment
of the advanced royalties. Royalties under the agreement are shared among NBC,
the Company, and Greystone.
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In June 1996 the Company entered a three-year license agreement authorizing
TOP to broadcast the two Angels programs on TBS for a total license fee of
$100,000. TOP is permitted to air each of the Angels programs 18 times over the
three year period. The Company bears any obligation for residuals and must
refrain from licensing the programs to any other broadcaster in the United
States during the term of the license. TOP began airing the programs in October
1996.
Another short treatment of the Angels theme was developed and produced for
CCC at a cost to the Company of approximately $30,000. Payments to the Company
are based on revenues generated by CCC through use of the treatment as a sales
aid. In fiscal 1996, the Company determined that because of the low current
level of sales experienced by CCC, revenues due to the Company from CCC for this
project are likely to be insufficient to cover the associated costs to the
Company.
The Company also developed a book entitled Angels: The Mysterious Messengers,
edited for American Artists by Mr. Hauck and published by Ballantine Books, Inc.
The book has also been published in German, Italian, French and Spanish
editions. Advance royalties for the book amounted to $250,000.
The agreement among the Company, Greystone and NBC provided for (i) the
payment of license fees by NBC to American Artists and Greystone and (ii) the
payment to NBC of 50% of the royalties from videos sold during the NBC
broadcasts and 20% of the royalties from videos sold by Time-Life Videos. Under
an agreement dated May 1994, the Company and Greystone agreed to divide equally
all revenues from the two television specials and certain derivative properties.
The scope of that agreement and the definition of allowable expenses were the
subject of a dispute between the parties that was settled in May 1997. See
"Intellectual Property" and Item 3. "Legal Proceedings."
The Company financed development of the initial Angels program primarily
through the private placement of $128,000 of its Revenue Participating Joint
Venture Investment Units with eight accredited investors. The private placement
was completed in February 1994. Investors receive 100% of the Company's
revenues from the first television special and ancillary rights until their
initial investment has been returned, 50% thereafter until an equal additional
amount has been received, and 25% of any further revenues. The investors also
receive 5% of the Company's revenues from the second television special.
Through July 1997 the investors had received an aggregate return of $1.30 for
each dollar of their investment. Additional distributions may be made later
depending on future revenues of the Angels programs.
Other Television Projects. The Company currently has over twenty television
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projects/proposals in various stages of development, presentation, pre-
production and production including both television specials and series.
Negotiations are ongoing with a cross-section of the television industry,
including representation from cable, network and public television. There can be
no assurances that these negotiations will yield production agreements that will
be acceptable to the Company or that any of the projects will result in
completed films or series.
Johnson/Woodman Project. The Company has completed principal photography for
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a television special featuring the ideas and opinions of Robert Johnson and
Marion Woodman, experts in the fields of Jungian psychology, mythology and dream
interpretation. This project is being co-produced with Georgia Public
Television ("GPTV"), a division of the Georgia Public Telecommunications
Commission, and in association with the Episcopal Radio-TV Foundation. The
Company anticipates that editing and post-production will yield a completed
project available for release on GPTV or the Public Broadcasting System in
fiscal 1998.
The Company has executed several agreements related to this production which
provide for a sharing of revenues, after recovery of all production costs, as
follows: equal shares to the Company and GPTV after an allocation of 10% to the
Episcopal Media Center ("EMC") and 5% each to Mr. Johnson and Ms. Woodman. The
portion allocable to EMC remains in effect for a period of five years from the
date of first sale. The agreements also provides EMC with exclusive rights for
certain religious markets and a 50/25/25 sharing between the Company, Mr.
Johnson and Ms. Woodman, respectively, of any revenues related to sale of book
rights.
Windows of Heaven. The Company has also completed its principal photography
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and prepared a three minute trailer for a project on the subject of re-occurring
global-wide destructions throughout recorded time. This project is being
produced in association with King Arthur Productions, LLC ("KAP"). The
production agreement calls for the distribution of revenues, after the recovery
of all production costs, as follows: 46.5% to the Company and the remainder to
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KAP's investors and other parties associated with the project. This allocation
remains in effect for revenues received for licensing rights covering the period
from June 1997 to December 2000, with all other revenues allocated evenly
between the Company and KAP.
The Company has initiated discussions with several cable television networks
in relation to the licensing of rights for this production, but there can be no
assurance that a suitable licensing agreement can be reached or that the
proposed project will be carried out.
The Millennium. Since 1995 the Company has been developing, under Mr.
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Hauck's supervision, the concept for a related group of television specials and
other media properties pertaining to the forthcoming end of the second
millennium of the modern era. The development work has included historical and
scientific research, development of themes and preparation of story treatments.
The Company has presented its "millennium" concept and certain treatments to
several over-the-air and cable television networks. Several networks have
indicated interest in the properties but the Company is unable to state whether
the interest will continue or whether the parties will reach a mutually
satisfactory agreement through negotiation. The Company's goal is also to
derive related video and book properties from any television program that might
be produced.
In October 1994 the Company organized Millennium Group, L.L.C. ("MG"), as a
Georgia limited liability company with itself as Manager, for the purpose of
developing an initial one-hour television special on the subject of the
millennium. MG has financed certain research and development of the millennium
materials through a private placement of $50,000 of limited liability company
interests with three accredited investors. If MG is able to obtain network or
other funding for producing the program, the investors are entitled to recover
100% of MG's net income from the program until their initial investment has been
returned, 50% thereafter until an equal additional amount has been received, and
10% of any further net income. All other net income would be paid to the
Company as management fees.
Feature Films. The Company also has a number of other feature film
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properties (screenplay or treatment) in various stages of development, and holds
an option to acquire one feature film property. The Company has commenced
casting for the lead roles for two of its feature film properties and
anticipates entering the production phase in fiscal 1998 for at least one of
these projects. The Company believes that if the lead roles have been cast, the
financing of these projects can be accelerated. No formal commitments have been
obtained for financing production of any of those properties and there can be no
assurance that any of these properties will be developed into completed films.
Under a February 1992 agreement, as amended, the Company issued shares of
its common stock to Icon International, Inc. ("Icon"), in exchange for $500,000
in credits for certain media advertising. The availability of the media credits
expires December 31, 1998, but up to one-half of any credits not used by that
date may be returned to Icon in exchange for a portion of the shares previously
issued (calculated at the rate of $3.41 of unused media credits for each share
of stock). The Company anticipates using the credits, at least in part, for
promoting its film and video properties.
Commercial Contract Production
First Light Entertainment Corporation ("First Light") and Diversity
Filmworks, Inc. ("Diversity"), (collectively, the "Commercial Companies")
produce television commercials on a contract basis for advertisers and/or their
agencies. They typically enter short-term agreements for the production of the
commercials, whose scripts or story outlines ("story boards") are provided by
the client. The Commercial Companies then typically arrange all production
aspects of the commercials, including casting, location selection and
contractual arrangements with the director and other production personnel. The
Commercial Companies use on a regular basis, the services of approximately seven
independent directors, some of whom direct only commercials produced by the
Commercial Companies. These directors are paid on a fixed fee basis determined
by mutual agreement during the commercial production budgeting process, although
other compensation arrangements may be used from time to time, including
director participation in the gross profits of commercials.
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The Commercial Companies generally produce their commercials on a "firm bid"
basis as opposed to a "cost plus fixed fee" basis. If a commercial is produced
within the framework of "firm bid," the production company is responsible for
any costs in excess of the budget, unless approved by the client. If the
commercial is filmed under "cost plus fixed fee" arrangement, the Commercial
Companies receive a predetermined fee for their work and approved production
costs are charged to the client as incurred. Despite the differences in the
structure of the two forms of bids, the risk of costs overage to the Commercial
Companies are not substantially greater for "firm bid" because the Commercial
Companies are also responsible for unapproved costs overages that exceed the
budget for a "cost plus fixed fee" bid. Production company personnel in tandem
with the advertising agency responsible for the commercial, must carefully
monitor costs throughout the filming process, whether a "firm bid" or "cost plus
fixed fee" arrangement is operating. The agreed upon bid might be altered
because the agency, client and director agree upon a new creative option or
because of unexpected occurrences such as inclement weather or unavailability of
location. In most circumstances, the Commercial Companies bill the advertising
agency for 50% of the entire budget as stated in the bid, to be paid in advance
or on the first day of principal photography. The remainder of the bid price is
generally paid in one or more installments by the agency within 30 to 120 days
after completion of principal photography.
In marketing their services the Commercial Companies emphasize the talents of
the directors with whom they work, their skills in cost control and timely
production, the quality of the production and the advantages of Atlanta as a
production center. In its work, Diversity especially emphasizes use of
directors and other production staff from diverse cultural and ethnic
backgrounds. Although most of the commercials produced by the Commercial
Companies are filmed in Atlanta, they are experienced at producing commercials
throughout North America.
In fiscal 1997 the Commercial Companies produced 22 commercials for net
revenues of $3,470,000, compared to 41 commercials and $2,467,000 in net
revenues for fiscal 1996. Based on the volume of story boards presently being
submitted to it for bids or cost estimates, management of the Company
anticipates a continued improvement in revenue levels of the Commercial
Companies during fiscal 1998. The Commercial Companies have a backlog of
awarded commercial production contracts (either in-process or not yet commenced)
of approximately $1,500,000, in fiscal 1998 through October 29, 1997.
For fiscal 1997, three of the Commercial Companies' customers accounted for
fees equal to 21.2%, 19.7% and 12.2% of consolidated revenues. The Commercial
Companies obtain their revenues from discrete project assignments obtained from
various clients. Accordingly, while the fees from one or more clients may, in
any year, be significant as the result of the size of a project undertaken for
that client, the Commercial Companies are not dependent on any one client for a
material amount of their revenues.
Large Screen Video Display ("LSVD") Operations
In August 1997 the Company, certain members of its Board of Directors and an
officer of Diversity, organized Video Communications Network, LLC ("VCN"). The
Company acquired 83.3% of the initial ownership of VCN in exchange for nominal
consideration. VCN was organized for purposes of developing, managing and
providing programming for a network of LSVD operations in domestic and
international locations. VCN plans to develop LSVD operations that deliver a
mixture of programming, advertising and special events similar to the present
LSVD operation conducted by an unaffiliated company at Times Square in the City
of New York.
VCN has commenced negotiations with potential advertisers, investors and
other parties for its planned initial location at Underground Atlanta in
Atlanta, Georgia. VCN is in the development stage and is subject to a variety
of conditions, including sufficient commitments by advertisers, the availability
of financing, and compliance with applicable regulatory requirements.
The Company anticipates that the Atlanta LSVD operation will be organized as
a separate limited liability company which may seek financing from investors
through a private placement of equity interests. However, other possible
financing alternatives are also being evaluated.
There is no assurance that the project can be brought to fruition or would be
profitable for the Company if completed. Additionally, in order to raise
financing for the development of VCN's projects, VCN may issue LLC shares or
other equity securities to third party investors, in which case the Company's
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ownership of VCN, and the portion of any VCN profits to which it would be
entitled, would be diluted. To date, VCN has not generated any revenues nor
incurred a significant level of expenses.
COMPETITION
The industries in which the Company operates are extremely competitive and
include major corporations with substantially greater resources than the
Company.
Film Development and Production
-------------------------------
Although the demand for low-cost quality media products has expanded
dramatically with the growth of cable, video and foreign markets, the production
of television specials and feature films remains dominated by major studios and
distributors. In addition, some major distributors such as Walt Disney, Turner
Broadcasting and Fox Broadcasting have acquired or developed their own
production companies. In this environment the Company competes on the basis of
the artistic creativity of its projects and its commitment to low-cost quality
production.
Commercial Contract Production
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The television commercial industry is subject to extreme price competition
and is highly fragmented. The Company competes in this industry with numerous
national and regional companies, no one of which has a major market share. The
Company competes primarily on the basis of the skills of its executive
producers, directors and production staff, and the advantages of Atlanta as a
production center.
LSVD Operations
An identifiable LSVD industry for the type of operations in which VCN plans
to engage has not fully developed. However, the Company anticipates that other
companies will pursue LSVD projects, and that as a result VCN will encounter
substantial competition, including competition from other companies with greater
financial resources. The Company plans to compete based upon its experience
gained during the development of this industry.
INTELLECTUAL PROPERTY
The Company's success and ability to compete will be dependent in part upon
its ability to obtain and maintain protection for its current and future
literary properties, to defend its intellectual property rights and to operate
without infringing on the proprietary rights of others, See "Item 3 Legal
Proceedings". While the Company relies on a combination of copyrights and
trademarks to establish and protect its intellectual property rights, the
management of the Company believes that factors such as the technical and
creative skills of its personnel are more essential to its success and ability
to compete. There can be no assurance that any intellectual property rights of
the Company will provide competitive advantages or will not be challenged,
invalidated or circumvented by competitors. There can be no assurance that
disputes will not arise concerning the ownership of intellectual property.
Furthermore, there can be no assurance that intellectual properties will not
become known or be independently developed by competitors or that the Company
will be able to maintain the confidentiality of information relating to its
literary properties.
EMPLOYEES
In its production activities, the Company relies primarily upon independent
third parties for production facilities and personnel. The Company currently
has fourteen full-time employees. A portion of the salaries payable to the
Company's employees is paid, from time to time, directly from the production
budgets of the projects on which the individuals are working. The Company hires
additional personnel for projects on a contract basis as needed. Such
individuals are generally paid directly from the budget of the projects on which
they are working.
The Company is a Signatory of The Writers Guild of America and is subject to
its industry-wide collective bargaining agreement. The Company is not a party
to any other collective bargaining agreement. However, it is possible that some
of the Company's business activities may be affected by the existence of
collective bargaining agreements since many of the performing artists and
technical personnel, such as cameramen and film editors, that it employs from
time to time on specific projects are members of unions. The extent to which
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collective bargaining agreements may affect the Company is difficult to estimate
and strikes related to collective bargaining or other collective action by union
members could, in the future, delay or disrupt activities.
ITEM 2. DESCRIPTION OF PROPERTY
The Company leases as its headquarters a facility of approximately 8,000
square feet located at 1245 Fowler St., N.W., in Atlanta, Georgia. Rent under
the lease, which expires in November 1997, is $3,300 per month. The Company
plans to negotiate for an extension of its existing lease. The Company does not
own sound stages and related production facilities (generally referred to as a
"studio") and, accordingly, does not have the fixed payroll, general,
administrative and other expenses resulting from ownership and operation of a
studio. Studio facilities are generally available for rental as needed.
ITEM 3. LEGAL PROCEEDINGS
On or about May 1, 1995, Greystone Communications, Inc. (Greystone"), the
Company's co-producer of the Angels television specials, commenced an
arbitration proceeding against the Company before the American Arbitration
Association Commercial Arbitration Tribunal ("AAA") in Los Angeles, California,
concerning relations under their 1994 co-production agreement. Greystone's
principal issues related to certain costs claimed by the Company and to
Greystone's contention that it was entitled to participate in revenues from the
book Angels: The Mysterious Messengers. The Company, in its counterclaim,
alleged that Greystone received excess revenue distributions based upon
overstatement of its expenses.
In June 1997, the Company settled all known issues related to this
arbitration by signing an agreement under which the Company agreed to pay
Greystone $140,000 over a period of fourteen months commencing in June 1997.
The Company also agreed to a stipulated arbitral award of $190,000 in the event
that the Company defaults on the payment arrangement contained in the agreement.
The agreement also calls for the Company to pay certain residuals related to
the two co-produced network television specials. These amounts are not
presently determinable; however, they are not considered to be material to the
Company's financial position or results of operations.
There has been substantial litigation in the entertainment industry with
respect to literary properties. The Company has no formal procedure for
monitoring the possible infringement of its literary properties by others or for
confirming that its literary properties do not infringe the rights of others,
but the Company does address specific issues as they are brought to its
attention from time to time. In 1992 the Company received approximately $350,000
in settlement of its claim that a certain motion picture then in production
infringed upon a literary property of the Company.
In 1996 counsel for MovieAmerica Corporation expressed to the Company
"concerns" that the four feature film properties transferred by Messrs. Steven
D. Brown and Rex Hauck to the Company at the time of its organization in 1991
were or should have been properties of MovieAmerica Corporation by reason of Mr.
Brown's duties while he was an employee of MovieAmerica Corporation, See Item 9
- - "Directors, Executive Officers, Promoters, and Control Persons; Section 16(a)
Beneficial Ownership Reporting Compliance." Messrs. Brown and Hauck have
assured the Company that MovieAmerica Corporation has no ownership interest in
the four literary properties.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
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PART II
ITEM 5. MARKETS FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Class A common stock was approved by the National Association of Security
Dealers (NASD) for an unpriced quotation on the Over-the-Counter (OTC) Bulletin
Board under the symbol "AAFC" on November 15, 1996. However, there have been no
trades in the Company Class A common stock as of October 29, 1997. As of the
October 29, 1997 there were 912,984 shares of Class A common stock outstanding
and 332 record holders of such shares. The Class B common stock by its form may
not be publicly traded. As of the October 29, 1997, there were 5,502,277 shares
of Class B common stock outstanding and 126 record holders of such shares.
The Company has not declared or paid any cash dividends on its common stock
since its formation, and the board of directors currently intends to retain all
of its earnings, if any, for its business. The declaration and payment of cash
dividends will be at the discretion of the board of directors.
In a private placement of its Class A common stock commenced in November 1996
and completed in May 1997, the Company sold 164,000 shares of Class A common
stock at $2.50 per share in 16.4 units of 25,000 shares each. The purchaser
also received in respect of each unit, without additional consideration, a
warrant to purchase up to 3,333 shares of Class A common stock at $3.00 per
share, exercisable through June 2000. Purchasers of fractional units received a
prorated warrant.
The units were sold by directors and executive officers of the Company
without commission or additional compensation. All sales were for cash. The
sales were made in reliance upon the exemption from registration contained in
Regulation D of the Securities Act of 1933. All of the purchasers were
"accredited investors" within the meaning of Regulation D.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
As discussed elsewhere herein, on October 7, 1996, Old American Artists and
Setab merged in a transaction in which each of the 9,407,837 shares of Old
American Artists common stock became .5862 shares of common stock of the
Company, and the Company succeeded to the business of Old American Artists.
Old American Artists is considered the predecessor to the Company, and prior
to and at the completion of the Merger, the Company, then Setab, had no material
assets, liabilities or operations. Additionally, for accounting purposes, the
Merger is being accounted for as a recapitalization of Old American Artists,
with the operating results of Old American Artists prior to the Merger becoming
the operating results of the Company for that period.
Accordingly, the following discussion of financial condition and results of
operations focuses on the financial condition and results of operations of Old
American Artists.
The Company is engaged in two lines of business; (i) the development and
production of television, cable and feature films, and (ii) the contract
production of films, generally television commercials. A third line of
business, LSVD Operations, is in the organizational and developmental stage and
has not incurred a significant level of expenses nor commenced operations.
Revenues from the license or sale of films produced by the Company are
generally recognized when the film is exhibited or is available for distribution
in the applicable market. In general, the majority of the revenue to be derived
from a film will be earned during the two to three years following its initial
release. Accordingly, film revenues will fluctuate dependent on the timing of
the Company's production and release of films.
Additionally, in some instances the level of revenues generated by a film in
the periods immediately following its release may not be directly related to the
film's success. As described below, the Company might sell certain distribution
rights, in advance of production, for fixed amounts as a means of financing
production costs. In those instances, the film's success might not affect
revenues initially, but could generate revenues later as the result of
distribution in secondary markets or the sale of ancillary products.
-10-
<PAGE>
The Company capitalizes the costs incurred to develop, produce and print
films, as well as advertising and other costs that benefit future periods.
Capitalized film costs are amortized, using the individual film forecast method,
under which capitalized costs are amortized based on total projected gross
revenues.
Several factors can affect the relationship that amortized film costs bear to
film revenues. The Company has in the past exchanged, and may in the future,
exchange interest in the revenues from certain or all distribution for
contributions towards the costs of production. Capitalized costs, and the
related amortization, are reduced by such contributions, while revenues are
reduced for outside interests. Accordingly, the terms of the arrangements,
which can vary from film to film, in addition to the total costs of the film,
will affect the relationship of film costs to film revenues.
The Company engages in the commercial production business through its wholly-
owned subsidiary, First Light, and through American Artists' 49% ownership
interest in Diversity. The Company's commercial production services are
performed by the Commercial Companies under short-term (typically less than two
months) agreements. The Commercial Companies generally use fixed fee agreements.
Revenues and costs will therefore vary based on the number of production
assignments obtained and completed in any particular period, and the
profitability of the individual assignments. The number of production
assignments obtained in any particular period will be influenced by both the
overall level of commercial production activity in the markets in which the
Commercial Companies operate, and their success in competitive biddings, and can
therefore fluctuate significantly. Overall commercial production activities are
influenced by, among other things, the general economic trends that effect the
advertising plans and expenditures of commercial and not-for-profit industries
and enterprises in the Commercial Companies' geographic markets. Such general
economic trends and conditions can neither be controlled, nor predicted by the
Company. The Commercial Companies' success in competitive biddings will depend
on the potential customer's assessment, relative to other bidders, of the
production, talent and capabilities offered by the Company and the quoted fee.
In anticipation of the Merger, in September 1996, Old American Artists and
the other stockholder of Diversity entered into an agreement concerning the size
and composition of Diversity's board of directors. See "Item 12 - Certain
Relationships and Related Transactions." Therefore, effective August 1, 1996,
the Company consolidated the accounts of Diversity in its consolidated financial
statements, as a result of which the consolidated financial statements in fiscal
1997 lack comparability in certain respects to those for fiscal 1996.
The consolidated financial statements for fiscal 1996 included elsewhere
herein reflect the investment in Diversity accounted for using the equity method
of accounting, under which the Company's interest in Diversity's operating
results is presented as a single, separate line item in the consolidated
statement of operations, and the Company's net investment in and advances to
Diversity are presented as a single item in the consolidated balance sheet.
Revenues, as reflected in the consolidated statement of operations, do not
include the revenues of Diversity. Financial information for Diversity is
presented separately in Note 1 of the Notes to the Consolidated Financial
Statements.
RISK FACTORS
Certain statements in the following discussion of financial condition and the
results of operations, or elsewhere in this report, represent "forward-looking"
statements as defined in the Private Securities Litigation Reform Act of 1996.
Such statements involve matters that are subject to certain risks and
uncertainties, as a result of which actual future results or events many differ
materially depending on a variety of factors.
The future results of the Company's television specials is, and the planned
production of feature films will be, subject to a substantial degree of risk.
Each project is an individual artistic work, and its commercial success is
primarily determined by the reactions of distributors and the general public,
each of which is unpredictable. Historically, many feature films do not
generate a net profit or a return on investment, and there is a substantial
degree of risk that the production and exploitation of a film by the Company
would not allow a recovery of the costs incurred by the Company in its
production. Additionally, as discussed elsewhere herein, the Company will be
required to raise significant capital to pursue the production of the films it
is presently developing, either through the sale of revenue interests in the
films, the pre-production sale of distribution rights, or the sale of equity or
debt securities by the Company. There can be no assurance that the Company will
be able to raise the necessary funds to pursue the production of these films,
which creates an additional uncertainty.
-11-
<PAGE>
In the commercial production of commercials and other properties by the
Commercial Companies, the Company competes in an industry that is highly
fragmented, and the result of the operations of the Commercial Companies will
vary depending on the number of production assignments obtained. The number of
production assignments the Commercial Companies obtain is affected by various
factors discussed above.
RESULTS OF OPERATIONS
YEAR ENDED JULY 31, 1997 COMPARED TO YEAR ENDED JULY 31, 1996
Revenues for the year ended July 31, 1997 ("fiscal 1997") increased as
compared to revenues for the year ended July 31, 1996 ("fiscal 1996") as a
result of an increase in both commercial production and film revenues and the
consolidation of Diversity.
Revenues for fiscal 1997 were $3,890,592 which represented a $2,178,953 or
127.3% increase over revenues of $1,711,639 for fiscal 1996. However, revenues
for Diversity, which was accounted for on the equity basis during fiscal 1996,
and therefore not included in consolidated revenues, were $777,309 for fiscal
1996. As discussed in Note 1 of the Consolidated Financial Statements,
beginning in fiscal 1997 the Company consolidated the accounts of Diversity.
Commercial production revenues for the year ended July 31, 1997 increased by
$1,780,011 or 105.3% to $3,469,655 from $1,689,644 for the year ended July 31,
1996, due to an increase in the average size of awarded commercial production,
which more than offset a decrease in the number of commercial production
projects performed, and the inclusion of Diversity's revenues in fiscal 1997.
In fiscal 1997 the number of commercials productions decreased to 22 from 41 in
fiscal 1996. Adjusted to include Diversity's revenues in the earlier period,
commercial production revenues increased by $1,002,702 or 40.6%.
Commercial production costs, as a percentage of related revenues, were 76.6%
for the year ended July 31, 1997 as compared to 78.8% for the year ended July
31, 1996. This decrease in commercial production costs, relative to revenues,
was primarily the result of an increase in the average size of awarded
commercial production contracts and resulting increased levels of gross profit.
Gross profits for commercial production were $813,591 and $359,040 for fiscal
1997 and 1996, respectively.
Film revenues for the year ended July 31, 1997 were $420,937 which
represented a $398,942 or 1,813.8% increase from film revenues of $21,995 for
the year ended July 31, 1996. This increase in film revenues was primarily the
result of the recognition of film revenues related to the release in March 1997
of the cable television special, "Fire From The Sky", which was co-produced by
the Company. The Company did not release any films in fiscal 1996 and therefore
had no significant film revenues in that year.
Film cost amortization for the year ended July 31, 1997 was $362,214 and
represented an increase of $346,251 from film cost amortization of $15,963 for
the year ended July 31, 1996. This increase in film cost amortization is
related to the release, in March 1997, of the Company's co-produced cable
television special.
Selling, general and administrative ("SG&A") expenses decreased $3,814 to
$1,347,413 for the year ended July 31, 1997 from $1,351,227 for the year ended
July 31, 1996. Adjusted for the inclusion of Diversity in fiscal 1996, SG&A
expenses for fiscal 1997 decreased by $326,639. These decreases were primarily
the result of efforts by the Company to reduce expenses, in relation to fiscal
1996, in all expense categories, focusing primarily on the areas of professional
services, marketing and financing activities.
Interest expense increased to $15,746 for fiscal 1997 from $6,777 for the
year ended July 31, 1996. This increase was the result of an increase in
outstanding debt during the year ended July 31, 1997.
Other expense increased by $90,000 for the year ended July 31, 1997 and
resulted from an accrual for the settlement by the parties of a dispute
discussed in Note 6 to the consolidated financial statements.
As a result of the foregoing factors the Company incurred a net loss of
$580,845 for the year ended July 31, 1997 as compared to a net loss of
$1,186,938 for the year ended July 31, 1996.
-12-
<PAGE>
The Company has provided a 100% valuation allowance against deferred tax
assets associated with its net operating loss carryforwards as management has
concluded that it is not "more likely than not" that the benefit of deferred tax
assets will be realized.
LIQUIDITY AND CAPITAL RESOURCES
The Company's strategic goal is to finance its operating (i.e. selling,
general and administrative) expenses from the gross profits generated by its
television film and commercial production operations while utilizing equity
financing, pre-production license revenues, and co-producer contributions to
finance the production of feature films. Using this strategy, the Company seeks
to reduce or eliminate the burden of significant operating losses and negative
cash flows, while retaining the potential for significant profits and positive
cash flows from highly successful feature films. The success of such a strategy
is, however, dependent on the Company's ability to control operating expenses,
to obtain sufficient, and sufficiently profitable, commercial production
contracts and to produce profitable television film projects.
Operating cash flows were a negative $763,426 for the year ended July 31,
1997 primarily the result of a $565,099 shortfall in the coverage of SG&A and
other expenses by television film and commercial production profits. The
operating cash flow shortfall was financed with funds obtained from new debt and
equity financing.
Operating cash flows were a negative $1,074,135 for the year ended July 31,
1996, due to a $986,155 shortfall in the coverage of SG&A expenses by television
film and commercial productions profits. This operating cash flow shortfall was
primarily financed from equity investments.
Operating cash flows for the year ended July 31, 1997 were also affected by a
net increase in accounts receivables, in excess of an increase in accounts
payable, amounting to $228,301 at July 31, 1997. The net accumulation of
accounts receivable at July 31, 1997 was a direct result of an increase in
commercial contract production revenues in the fourth quarter of fiscal 1997 as
compared to the fourth quarter of fiscal 1996. Commercial contract production
revenues were $1,370,728 for the fourth quarter of fiscal 1997 as compared to
$749,738 for the fourth quarter of fiscal 1996. Accounts receivable were
$508,837 at July 31, 1997 and aggregate accounts receivable collections amounted
to $422,001 in August and September 1997.
The Company had film cost additions of $380,249 in fiscal 1997, of which
$362,214 related to cost incurred in the co-production of "Fire From The Sky."
This cable television special was released in fiscal 1997 and these costs were
fully amortized during the year ended July 31, 1997.
Cash provided by financing activities amounted to $804,152 for the year ended
July 31, 1997 as compared to $951,938 for the year ended July 31, 1996. During
fiscal 1997, the Company raised $410,000 from the private placement of its Class
A common stock and raised $535,000 (partially offset by $140,848 in repayments)
in borrowings under notes payable, including $235,000 advanced from related
parties and $300,000 advanced from lenders which are guaranteed by shareholders
and/or board members.
The Company's negative operating cash flows have, as previously stated,
generally been caused by a shortfall in the coverage of SG&A by television film
and commercial production profits. Such shortfalls in the coverage of SG&A by
television film and commercial production profits will cause the Company's
liquidity to be constrained until television film and commercial production
revenues, and the resulting profits, increase. The use of equity or debt
financing will continue to be necessary until television film and commercial
production profits are sufficient to cover SG&A expenses, which cannot be
assured.
The Company's operating cash flows were positively affected in the fourth
quarter of fiscal 1997 and have been positively affected in the first quarter of
fiscal 1998 by increases in commercial production revenues. Revenues for the
fourth quarter of fiscal 1997 amounted to $1,370,728 and awarded commercial
contract production amounted to approximately $1,500,000 for the first quarter
of fiscal 1998. Awarded commercial contract production for the first quarter of
fiscal 1998 is not necessarily indicative of future results for the year ending
July 31, 1998.
Notes payable and notes payable/related parties aggregating $465,593 will
mature during fiscal 1998, resulting in a significant demand upon the Company's
operating cash flows. If operating cash flows are unavailable to repay these
notes, the Company will attempt to either negotiate an extension of the due
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<PAGE>
dates for these notes or attempt to raise additional funds through new equity
financing. Additionally, the Company is currently considering asset based
financing as a means of addressing short-term cash flow requirements. In
October 1997 the Company received a non-binding commitment letter from a
financing institution for the establishment of an asset based line of credit not
to exceed $1,000,000. There can be no assurance that such a line of credit will
be established nor that the terms offered will be acceptable to the Company.
In August 1997, the Company issued 36,364 shares of Class A common stock for
an aggregate price of $100,000 to a member of the board of directors. In
connection with this transaction, the Company also issued a warrant for the
purchase 37,000 shares of Class A common stock at $2.80 per share, exercisable
through June 2000.
The Company has had discussions concerning additional private placements of
its debt or equity securities, and as a result thereof, believes that there will
be available sufficient capital to finance its business plans for fiscal 1998.
However, there can be no assurances that any such debt or equity financing will
be available to the Company, or if available, that such financing would be
available on terms considered acceptable to the Company. The inability to obtain
such equity or debt financing as needed would require the Company to have to
materially reduce the scope of its operations.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS No. 128").
SFAS No. 128, which is effective for periods ending after December 15, 1997,
revises the manner in which earnings per share is calculated and requires the
restatement, when first applied, of prior period earnings per share data. The
Company will initially apply SFAS No. 128 in the first quarter of fiscal 1998.
Upon the adoption of SFAS No. 128, the Company will restate previously reported
earnings per share data. The Company has not yet determined what effect, if
any, the restatement will have on previously reported data.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS
130"), which establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is
defined to include all changes in equity, except those resulting from
investments by owners and distributions to owners. Among other disclosures,
SFAS 130 requires that all items that are required to be recognized under
current accounting standards as components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as other
financial statements.
SFAS 130 is effective for financial statements for periods beginning after
December 15, 1997 and requires comparative information for earlier years to be
restated. Because of the recent issuance of this standard, management has been
unable to fully evaluate the impact, if any, the standard may have on future
financial statement disclosures. Results of operations and financial position,
however, will be unaffected by implementation of this standard.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information ("SFAS 131"), which supersedes Statement of
Financial Accounting Standards No. 14, Financial Reporting for Segments of a
Business Enterprise. SFAS 131 establishes standards for the manner in which
public companies report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas and major customers. SFAS 131 defines operating segments as
components of a company about which separate financial information is available
that is evaluated regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance.
SFAS 131 is effective for financial statements for periods beginning after
December 15, 1997 and requires comparative information for earlier years to be
restated. Because of the recent issuance of this standard, management has been
unable to fully evaluate the impact, if any, the standard may have on future
financial statement disclosures. Results of operations and financial position,
however, will be unaffected by implementation of this standard.
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<PAGE>
ITEM 7. FINANCIAL STATEMENTS
See index to financial statements on page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Steven D. Brown (1) (2) 50 Director, Chairman of the Board, Chief
Executive Officer
Rex Hauck (2) 46 Director, Co-President
Vivian W. Jones (1) 45 Director, Co-President
Robert A. Martinez 34 Vice President - Finance, Chief Financial
Officer and Treasurer
J. Eric Van Atta 33 Vice President, Secretary
John Boyd 61 Director
Malcolm C. Davenport, V 45 Director
Dan W. Holloway 75 Director
Norman J. Hoskin 63 Director
Ben Noble 45 Director
Glen C. Warren (1) 65 Director
</TABLE>
(1) Member of the Executive Committee of the board of directors
(2) Member of the Stock Option Committee of the board of directors
STEVEN D. BROWN - Mr. Brown founded the Company in July 1991 with Mr. Hauck
and has served as Chairman of the Board since July 1997, as Co-Chairman of the
Board from July 1994 through July 1997 and as Chief Executive Officer since the
Company's inception.
REX HAUCK - Mr. Hauck founded the Company in July 1991 with Mr. Brown. He
served as Executive Vice President from the inception of the Company until July
1994, when he was elected Co-Chairman of the Board, which position he held from
July 1994 until July 1997, and Co-President.
VIVIAN W. JONES - Ms. Jones, who has been involved in the film industry for
19 years, founded First Light Entertainment Corporation ("First Light"),
originally Current Corporation, in 1993 to purchase certain assets of Jayan
House, Ltd., a commercial production company, where she had been employed as
General Manager and Executive Producer since 1990. She has been president of
First Light since its founding and, since First Light's acquisition by the
Company in 1993, Co-president of the Company as well.
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<PAGE>
ROBERT A. MARTINEZ - Mr. Martinez joined the Company as Vice President-
Finance in December 1995 after nine years with the accounting firm of BDO
Seidman, LLP. Mr. Martinez became Treasurer in April 1996 and also assumed the
responsibilities of Chief Financial Officer in January 1997.
J. ERIC VAN ATTA - Mr. Van Atta has served as Vice President and Secretary of
the Company since its inception in July 1991.
JOHN BOYD, a private investor, was a physician on the staff of Southwest
Regional Medical Clinic from 1969 to January 1996 and President of Boyd Medical
Center in McComb, Mississippi, from 1965 to December 1995. Dr. Boyd became a
director of the Company in July 1991.
MALCOLM C. DAVENPORT, V, has practiced law in West Point, Georgia, since
October 1993, originally as a sole practitioner and since 1996 as a partner in
the firm of Coulter & Davenport. Mr. Davenport previously practiced law in
Dalton, Georgia, as a sole practitioner from 1984 to 1991 and as a partner in
Ponder & Davenport, P.C., from 1991 to 1993. He is currently a director of ITC
DeltaCom, Inc. a communications holding company, and a director and secretary of
Spintek Gaming Technologies, Inc., a gaming technology manufacturer and
licensor. Mr. Davenport became a director of the Company in July 1994.
DAN W. HOLLOWAY, is a physician in private practice in Las Vegas, Nevada
and has been affiliated, as a resident physician, with Desert Springs Hospital
since 1982. Dr. Holloway has also served as Chairman of the Department of
Family Practice at Desert Springs Hospital since 1993. Dr. Holloway became a
director of the Company in September 1996.
NORMAN J. HOSKIN, has been Chairman of the Board of Directors of Atlantic
International Capital, Inc. since July 1994. He was previously Chairman of
Atlantic Capital Group, Ltd., a venture capital advisory service, from 1986. Mr.
Hoskin is a director of Aquacare Systems, Inc., a producer of water purification
equipment, Consolidated Technologies Corp., a diversified manufacturing company,
COTG Technologies Group, Inc., a technology company, Trans Global Services,
Inc., a telephone and internet communications company and Sequential Information
Systems, Inc., a high-tech aircraft equipment company. Mr. Hoskin became a
director of the Company in September 1996. Mr. Hoskin has also served as
chairman and director of Tapistron International, Inc., a textile equipment
company.
BEN E. NOBLE, is a private investor and has been president and chairman of
The Noble Group, Inc., a management, investment and consulting firm, since 1989.
Mr. Noble became a director of the Company in March 1997.
GLEN C. WARREN, has served as Chairman of the Board of River Oaks Hospital in
Jackson, Mississippi, since 1988, President of Mississippi Diagnostic Imaging
Center, Ltd., since 1986 and as a clinical professor of neurological surgery at
the University of Mississippi School of Medicine since 1972. Dr. Warren became a
director of the Company in July 1994.
Each of the Company's directors is elected at the annual meeting of
stockholders and serves until the next annual meeting or until his successor has
been elected and qualified. Holders of Class A common stock and Class B common
stock, respectively, can elect a number of members of the board of directors
proportionate to the percentage which shares of the respective classes
constitute of the total outstanding shares of both classes, except that holders
of Class B shares in any event elect at least a majority of the directors.
Vacancies in the board of directors are filled by a majority vote of the
remaining members of the board of directors who were elected by the same class
of shareholders. Currently, there are no standing compensation arrangements for
non-executive board of director members. Executive officers of the Company are
elected by and serve at the discretion of the board of directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors, and persons who own more than 10% of the registered class
of the Company's equity securities to file reports of ownership with the
Securities and Exchange Commission. Officers, directors and greater than 10%
stockholders are required by the regulations of the Securities and Exchange
Commission to furnish the Company with copies of all Section 16(a) forms they
file.
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<PAGE>
Based solely on a review of the Forms 3 and 4 furnished to the Company, the
Company believes that all filing requirements applicable to its officers,
directors and greater than 10% beneficial owners were complied with, except
that: 1) Malcolm C. Davenport V, a director, failed to timely file Form 4 in
relation to one transaction, 2) Ben E. Noble, a director, failed to timely file
Form 3 in relation to one transaction, 3) Dr. Glen C. Warren, a director, failed
to timely file Form 4 in relation to one transaction, 4) Robert A. Martinez, an
officer, failed to timely file Form 4 in relation to two transactions, and 5) J.
Eric Van Atta, an officer, failed to timely file Form 4 in relation to two
transactions. These Forms 3 and 4 were filed with the Securities and Exchange
Commission prior to October 24, 1997.
The Company, which first became subject to Section 16(a) reporting
requirements in September 1996, has now initiated a reporting compliance program
that will substantially eliminate the possibility of inadvertent reporting
oversights in the future.
Form 5 is not required to be filed if there are not previously unreported
transactions or holdings to report. Nevertheless, the Company is required to
disclose the name of directors, executive officers and 10% shareholders who did
not file a Form 5, unless the Company has obtained a written statement that no
filing is due. The Company has been advised by those required to file Form 5
that no filings were due.
ITEM 10. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table furnishes compensation information for the year ended
July 31, 1997, for the chief executive officer; no other executive officers
earned more than $100,000 during the year ended July 31, 1997. During fiscal
1997 the Company's chief executive officer did not receive, and as of July 31,
1997 did not hold any stock options or SARs which have been granted in
connection with his service to the Company in any capacity.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------------------
NAME AND FISCAL OTHER ANNUAL
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- ---------------------------- ------ ------------ ----- ------------
<S> <C> <C> <C> <C>
Steven D. Brown 1997 $ 99,360 -0- -0-
Chairman of the Board 1996 104,040 -0- -0-
Chief Executive Officer 1995 94,500 -0- -0-
</TABLE>
STOCK OPTION PLAN
In May 1996 the Company adopted its 1996 Stock Option Plan (the "Stock Option
Plan"). The purpose of the Stock Option Plan is to encourage growth in
shareholder value by providing financial incentives to selected members of its
board of directors, employees, consultants and advisors who are in positions to
make significant contributions toward that success. The aggregate number of
shares reserved for issuance under the Stock Option Plan is 2,500,000 shares.
Options granted under the Stock Option Plan can be either (i) options intended
to qualify as "incentive stock options" under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or (ii) non-qualified stock
options. The Stock Option Plan permits the grant of stock appreciation rights in
connection with the grant of stock options. The Stock Option Plan is
administered by a stock option committee of the board of directors, consisting
of Messrs. Brown and Hauck. The stock option committee has the authority to
determine exercise prices applicable to the options, the eligible directors,
employees, consultants and advisers to whom options may be granted, the number
of shares and class of common stock subject to each option, and the extent to
which options may be exercisable. The stock option committee is empowered to
interpret the Stock Option Plan and to prescribe, amend and rescind the rules
and regulations pertaining to the Stock Option Plan. No option is transferable
by the optionee other than by will or the laws of descent and distribution, and
each option is exercisable during the lifetime of the optionee only by such
optionee.
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<PAGE>
No incentive stock option granted under the Stock Option Plan may be granted
at a price less than the fair market value of the underlying common stock on the
date of grant (or less than 110% of fair market value in the case of holders of
10% or more of the total combined voting power of all classes of stock). Non-
qualified stock options may be granted at the exercise price established by the
stock option committee, which may not be less than the fair market value of the
common stock on the date of grant.
Each option granted under the Stock Option Plan is exercisable for a period
not to exceed ten years from the date of grant (or five years in the case of a
holder of more than 10% of the total combined power of all classes of stock) and
shall lapse upon expiration of such period, or earlier upon termination of the
recipient's employment with the Company or as determined by the stock option
committee.
Pursuant to the Merger Agreement, options to purchase 2,251,200 shares of the
Company's Class B common stock were issued under the Stock Option Plan to
replace options previously granted by Old American Artists (under a comparable
stock option plan) and then outstanding, to purchase shares of Old American
Artists' common stock. No shares of common stock have been issued upon exercise
of options granted under the Stock Option Plan.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows beneficial ownership of capital stock of the
Company at October 29, 1997, for the directors and officers of the Company, and
for each beneficial owner of 5% or more of either class of the Company's common
stock.
<TABLE>
<CAPTION>
SHARES OF CLASS A SHARES OF CLASS B
-------------------- --------------------------
COMMON STOCK COMMON STOCK
-------------------- --------------------------
NAME NUMBER % OF CLASS* NUMBER % OF CLASS*
- ---- ------ ----------- --------- -----------
<S> <C> <C> <C> <C>
Steven D. Brown (1)(7) 100 - 1,256,127 22.83%
Rex Hauck (1)(2)(7) 300 - 1,311,029 23.83%
Vivian W. Jones (1)(3)(7) 600 - 1,318,350 20.66%
Robert A. Martinez (1)(4) - - 25,586 -
J. Eric Van Atta (1)(5) 2,767 - 160,057 2.85%
John W. Boyd (1)(6) 15,400 1.60% 385,906 6.96%
Malcolm C. Davenport, V(1)(9) 41,866 4.48% 142,730 2.59%
Norman J. Hoskin (1) - - - -
Dan Holloway (1) 2,667 - 35,172 -
Ben E. Noble(1)(10) 113,332 11.49% - -
Glen C. Warren (1)(7)(8) 88,564 9.18% 491,945 8.67%
Douglas J. Bates 117,020 12.82% - -
244 B Greenwood Drive
Ballwin, Missouri 63011
Alan G. Johnson 125,720 13.77% - -
325 Highway DD
Defiance, Missouri 63341
Australian Advisors Corp. 300,000 32.86% - -
Bay & Deveaux St. 2nd Fl.
P.O. Box N-1000
Nassau, Bahamas
All Officers and Directors as a
Group (11 persons) 265,596 24.71% 5,126,902 75.49%
</TABLE>
-18-
<PAGE>
* Any percentages under one percent (1%) are not shown.
(1) The address for the officers and directors is the corporate office of the
Company located at 1245 Fowler St., N.W., Atlanta, Georgia 30318.
(2) Includes 11,524 shares of Class B common stock and 200 shares of Class A
common stock owned by Mr. Hauck's minor children, as to which Mr. Hauck
disclaims beneficial ownership.
(3) Includes 879,300 shares of Class B common stock subject to purchase under
currently exercisable options. Also includes 14,555 shares of Class B common
stock and 100 shares of Class A common stock owned by Ms. Jones' minor son, as
to which Ms. Jones disclaims beneficial ownership, and 72,875 shares of Class B
common stock and 400 shares of Class A common stock transferred by Ms. Jones to
other relatives, which shares continue to be subject to the voting agreement
between Messrs. Brown, Hauck, Warren and Ms. Jones. See Note (7) below.
(4) Includes 25,586 shares of Class B common stock subject to purchase under
currently exercisable options.
(5) Includes 122,054 shares of Class B common stock subject to purchase under
currently exercisable options.
(6) Includes 43,965 shares of Class B common stock subject to purchase
under currently exercisable options and 15,000 shares of Class A common stock
subject to purchase under currently exercisable warrants. Also includes 2,245
shares of Class B common stock and 100 shares of Class A common stock owned by
Mr. Boyd's spouse, as to which Mr. Boyd disclaims beneficial ownership.
(7) Under an agreement (the "Voting Agreement") dated April 1996 Messrs.
Brown, Hauck and Warren and Ms. Jones agreed to vote all their shares of common
stock of the Company ("Committed Shares") as a block in accordance with the
majority vote (by shares) among themselves. The Voting Agreement will remain in
effect until April 2001, unless sooner terminated by a written agreement
executed by shareholders holding of record a majority of the Committed Shares
then subject to the Agreement.
(8) Includes 171,310 shares of Class B common stock subject to purchase under
currently exercisable warrants and options and 52,000 shares of Class A common
stock subject to purchase under currently exercisable warrants. Also includes
12,315 shares of Class B common and 100 shares of Class A common stock owned by
Dr. Warren's wife, as to which Dr. Warren disclaims beneficial ownership.
(9) Includes 87,830 shares of Class B common stock and 20,100 shares of Class
A common stock, held by Mr. Davenport as trustee of a family trust. Also
includes 11,724 shares of Class B common stock subject to purchase under
currently exercisable options and 21,666 shares of Class A common stock subject
to purchase under currently exercisable warrants.
(10) Includes 73,332 shares of Class A common stock subject to purchase
under currently exercisable warrants.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to an agreement dated August 31, 1993, and restructured November 3,
1995, the Company acquired all of the outstanding stock of Current Corporation
(later renamed First Light Entertainment Corporation) from Ms. Jones in exchange
for 439,650 shares of Class B common stock and an option to purchase up to
-19-
<PAGE>
879,300 additional shares of Class B common stock on or before September 1,
2003, at a price of $0.85 per share. Ms. Jones' options became exercisable in
three annual increments of 293,100 shares each, the last of which vested
September 1, 1996. Current Corporation, organized by Ms. Jones in August 1993,
had acquired certain assets of Jayan House, Ltd., a commercial production
business with which she had been employed, in exchange for its 4.37% note,
$100,000 principal amount, payable in 20 equal quarterly installments of
principal and interest commencing November 1993.
From December 1993 through July 1997, Dr. Glen Warren purchased 86,205 shares
of Class B common stock at an aggregate price of $125,000 ($1.45 per share). In
connection with certain of these purchases, Dr. Warren also received warrants
for the purchase of 25,862 shares of Class B common stock at a price, to be
determined by the related agreement, between $2.56 and $3.41. These warrants
are exercisable through June 1998.
In July 1993, Dr. Glen Warren and Dr. John Boyd personally secured a $100,000
revolving bank line of credit for the benefit of the Company. In September 1994,
the revolving line of credit was replaced by a note which the Company repaid in
monthly installments. This note was paid in full in fiscal 1997.
In June 1994, the Company purchased a 49% interest in Diversity Filmworks,
Inc., a newly incorporated corporation, consisting of 490 shares of common
stock, for a purchase price of $245. The owner of the other 51% is Tyrone C.
Johnson. In September 1996, the Company and Mr. Johnson entered into a
stockholder agreement pursuant to which the size of Diversity's board of
directors was set at five, of which three will be individuals designated by the
Company.
In November 1995, the Company granted Dr. Glen Warren an option to purchase
117,240 shares of Class B common stock at $1.45 per share, exercisable through
June 1999.
From December 1993 to July 1997, the Company made seven loans totaling
$70,844 to Steven D. Brown, each of which was represented by an unsecured
promissory note due December 1998, with accumulated interest of 7% per annum.
From December 1993 to July 1997, the Company made five loans totaling $54,767
to Rex Hauck, each of which was represented by an unsecured promissory note due
December 1998, with accumulated interest of 7% per annum.
From December 1993 to July 1997, the Company made four loans totaling $87,600
to Vivian Jones, each of which was represented by an unsecured promissory note
due December 1998, with accumulated interest of 7% per annum. Ms. Jones repaid
$23,000 against these notes in October 1996.
In April 1996 Messrs. Brown and Hauck, Dr. Warren and Ms. Jones entered an
agreement under which they agreed to vote all their shares of Class A and Class
B common stock as a block in accordance the majority vote (by shares) among
themselves. By reason of their corporate offices, share ownership and voting
agreements they may be deemed "controlling persons" of the Company.
In May 1996, the Company agreed to issue to Dr. Glen Warren options,
exercisable through June 2000, for the purchase of 28,208 shares of Class B
common stock, at $1.71 per share, contingent upon Dr. Warren arranging for the
Company a three month $75,000 line of credit. The line of credit was arranged
in July 1996. The line of credit was converted at its expiration into a six
month unsecured note due in May 1997 with a per annum interest rate of 8.75%.
The due date of the note was subsequently extended to November 1997. Dr. Warren
is the co-signer on the note.
The Company's original agreement dated May 16, 1995, as amended, with
Atlantic International Capital, Ltd., ("AIC"), of which Norman Hoskin is an
officer and stockholder, was terminated by mutual consent on September 27, 1996.
The Company then entered a new agreement retaining AIC, effective October 1,
1996, (i) to advise and offer counsel concerning communications and relations
with investors and with market makers in the common stock of the Company, and
(ii) to provide other business advice and counsel. This agreement was
terminated, by mutual consent of both parties, on October 31, 1996.
-20-
<PAGE>
In October 1996, Dr. Glen Warren and Malcolm C. Davenport, V each loaned
$25,000 to the Company for use as working capital and to fund operating losses.
The loans are due upon demand by the respective holders, but no later than
August 1997, and bear interest at the prime rate plus 1%. As consideration, the
Company issued each of the lenders an option to purchase up to 9,403 of Class B
common stock at $1.71 per share at any time through June 2000. The Company re-
paid $25,000 of these loans in June 1997; the remaining loan's fixed due date
was extended to August 1, 1998.
In a private placement completed in May 1997, several directors of the
Company subscribed as follows for units consisting of 10,000 shares of Class A
common stock and a warrant, exercisable through June 2000, to purchase 3,333
shares of Class A common stock at a price of $3.00 per share: Mr. Loveless, one
unit for $25,000; Mr. Noble, four units for $100,000; and Mr. Davenport, two
units for $50,000 (including one unit as trustee of the Malcolm C. Davenport
Trust).
In April 1997, Dr. Glen Warren made a short-term advance, without interest,
of $30,000 to the Company for a period of eight days.
In June 1997, Dr. Glen Warren loaned the Company $30,000. This demand loan,
as amended, bore interest at the prime rate plus 1% and was due on demand, but
no later than August 1, 1998. The Company settled this loan in August 1997.
In July 1997 certain directors of the Company guaranteed revolving lines of
credit, or extended personal revolving lines of credit to the Company in the
following principal amounts; Messrs. Boyd, Davenport and Dr. Warren, $75,000
each; Mr. Noble, $100,000. The lines of credit bear interest on loan balances
outstanding at the prime rate plus 1% and are due July 1998. As consideration,
in October 1997 the Company issued each member of the group warrants for the
purchase of 5,000 shares of Class A common stock at $4.58 per share, exercisable
through June 2000, in respect of each $25,000 of revolving line of credit
guaranteed or provided.
In August 1997, Glen C. Warren purchased 36,364 shares of Class A common
stock for a an aggregate price of $100,000. In connection with this purchase
Dr. Warren also received a warrant to purchase 37,000 shares of Class A common
stock at $2.80 per share, exercisable through June 2000.
In August 1997, Messrs.. Boyd, Davenport, Noble and Dr. Warren, participated
in the organization of Video Communications Network, LLC, a 83.3% owned
subsidiary of the Company that has not yet commenced operations. In exchange
for nominal consideration, this group received 666 Ordinary LLC shares of VCN,
representing 6.7% of the outstanding Ordinary and Deferred LLC shares.
In October 1997, Ben E. Noble received warrants to purchase 40,000 shares of
Class A common stock at a purchase price of $4.58 per share, exercisable through
June 2000, in consideration of his having agreed to join the board of directors.
-21-
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBIT LIST
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
2.1* Agreement and Plan of Merger dated as of May 1, 1996 with
American Artists Film Corporation
3.1* Articles of Incorporation of the Registrant
3.2* Amended and Restated Bylaws of the Registrant
3.3* Amendment to Articles of Incorporation of the Registrant
adopted May 1, 1996
3.4* Articles of Incorporation of American Artists
3.5* Bylaws of American Artists
10.1* Form of Indemnification Agreement
10.2* Consulting Agreement with Douglas J. Bates
10.3* Consulting Agreement with Alan G. Johnson
10.4* Promissory Note with Douglas J. Bates
10.5* Promissory Note with Alan G. Johnson
10.6* Common Stock Investment Agreement, dated February 24, 1992,
and the Agreement dated February 24, 1992, between
American Artists and Icon International, Inc.,
as extended by letter dated August 21, 1995
10.7* Asset Purchase Agreement, dated August 1, 1993, between
Current Corporation and First Light Entertainment Corporation
10.8* Lease Agreement, dated August 5, 1993, between
Kee Joint Venture and Current Corporation, as renewed June 15, 1995
between Kee Joint Venture and First Light Entertainment Corporation
10.9* Share Purchase Agreement, dated August 31, 1993, and Amendment
Agreement, dated November 3, 1995, between American Artists and Vivian
Walker Jones, with respect to shares of First Light Entertainment
Corporation
10.10* Agreement, dated April ___, 1994, between NBC Entertainment
and Greystone Communications, Inc., as supplemented by letter agreement
dated April 7, 1994, regarding Angels I
10.11* License Agreement, dated April 13, 1994, between Calling Card Company,
Inc. and American Artists, as supplemented by letter agreement dated
July 28, 1994
10.12* Letter Agreement, dated May 13, 1994, between Calling Card Company, Inc.
and American Artists
10.13* Joint Venture Agreement, dated May 20, 1994, between
Greystone Communications, Inc. and American Artists
10.14* Subscription Agreement, dated June 29, 1994, between American Artists
and First Light Diversity, Inc.
10.15* Agreement, dated July 26, 1994, between NBC Entertainment and
Greystone Communications, Inc., as supplemented by agreement
dated July 26, 1994, regarding Angels II
10.16* Distribution Agreement, dated July 26, 1994, as revised October 10,
1994, between Alfred Haber Distribution, Inc. and American Artists
10.17* Agreement, dated August 3, 1994, between American Artists and
Ballantine Books
10.18* License Agreement, dated as of August 8, 1994, between Time-Life Video
and American Artists
10.19* Promissory Note, dated September 13, 1994, made by John W. Boyd and
Glen C. Warren, to be paid to the order of Deposit Guaranty National
Bank
10.20* Financial Consulting Agreement, dated May 6, 1995, between
Atlantic International Capital, Ltd. and American Artists,
as amended by letter agreement dated May 1, 1996
10.21* American Artists 1995 Stock Option Plan, approved December 1, 1995
10.22* Voting Agreement, dated april 29, 1996, among Rex Hauck, Steve Brown,
Dr. Glen Warren, and Vivian Jones
-22-
<PAGE>
10.23* License Agreement, dated as of April 30, 1996, between American Artists
and Turner Original Productions, Inc., regarding Angels I and Angels II
10.24* Development Agreement, dated June 14, 1996, between American Artists
and Turner Original Productions, Inc.
10.25* Articles of Incorporation of Millennium Group, L.L.C.
10.26* Operating Agreement of Millennium Group, L.L.C.
10.27* Articles of Organization of Death and Taxes Film Company, L.L.C.
10.28* Form of Operating Agreement of Death and Taxes Film Company, L.L.C.
10.29* Articles of Incorporation of First Light Entertainment Corporation
10.30* Bylaws of First Light Entertainment Corporation
10.31* Articles of Incorporation of Diversity Film Works, Inc.
10.32* Bylaws of Diversity Film Works, Inc.
10.33* Unsecured Promissory Note dated July 17, 1996 issued to Deposit
Guaranty National Bank
10.34* Agreement with Liberty Transfer Co.
10.35* Voting Agreement between American Artists Film Corporation and Tyrone
C. Johnson
10.36* Lease Agreement, dated August 15, 1996, between
Kee Joint Venture and First Light Entertainment Corporation
10.37* Promissory Note, dated November 21, 1996, made by American Artists Film
Corporation and co-signed by Glen C. Warren, to be paid to the order of
Deposit Guaranty National Bank
10.38* Financial Consulting Agreement, dated May 16, 1995, between
Atlantic International Capital, Ltd. and American Artists, as amended
by letter agreements dated May 1, 1996 and September 27, 1996
10.39* Overhead Allocation Agreement between American Artists Film
Corporation and Diversity Filmworks, Inc. , dated July 31, 1996
10.40* Production Agreement, dated October 11, 1996, between American Artists
and Turner Original Productions, Inc.
10.41* Common Stock Investment Agreement, dated February 24, 1992,
and the Agreement dated February 24, 1992, between
American Artists and Icon International, Inc.,
as extended by letter agreements dated August 21, 1995
and December 10, 1996
10.42 Amendment, dated October 15, 1997, to Distribution Agreement, dated July
26, 1994, as revised October 10, 1994, between Alfred Haber
Distribution, Inc. and American Artists (Amendment of Exhibit 10.16)
10.43 Termination Letter to Liberty Transfer Company
10.44 Amendment to Production Agreement, dated October 11, 1996, between
American Artists and Turner Original Productions, Inc. (Amendment to
Exhibit 10.40)
10.45 Common Stock Investment Agreement, dated February 24, 1992,
and the Agreement dated February 24, 1992, between American Artists
and Icon International, Inc., as extended by letter agreements
dated August 21, 1995 and December 10, 1996 and October 20, 1997
10.46 Agreement with Continental Stock Transfer & Trust Company dated
November 6, 1996.
10.47 Promissory Note, dated May 20, 1997, made by Glen C. Warren, to
be paid to the order of Deposit Guaranty National Bank
10.48 Settlement Agreement and Release, dated May 29, 1997, by and
between Greystone Communications, Inc. and American Artists Film
Corporation
10.49 Letter of Agreement by and between Desmond Towey & Associates
and American Artists Film Corporation dated June 18, 1997
10.50 Promissory Note, dated July 17, 1997, made by Glen C. Warren, John W.
Boyd, and Malcolm C. Davenport, to be paid to the
order of First Bank of Childersburg
10.51 Production Agreement between King Arthur Productions, LLC and
American Artists Film Corporation
10.52 Subscription Agreement and Stock Purchase Agreement both dated
September 3, 1997 for Glen C. Warren
10.53 Agreement between Marion Woodman and American Artists Film
Corporation dated September 17, 1997
-23-
<PAGE>
10.54 Agreement between The Episcopal Media Center and American
Artists Film Corporation dated September 18, 1997
10.55 Agreement between Robert Johnson and American Artists Film
Corporation dated September 25, 1997
10.56 Agreement between Georgia Public Television and American
Artists Film Corporation
10.57 Unsecured Promissory Note, dated as of October 2, 1996, issued
to Malcolm C. Davenport
10.58 Unsecured Promissory Note, dated as of October 3, 1996 issued
to Glen C. Warren
10.59 Unsecured Promissory Note, dated as of October 10, 1996, issued
to Martin Howard
10.60 Unsecured Promissory Note, dated as of June 3, 1997, issued to
Glen C. Warren
10.61 Letter of Agreement, dated July 17, 1997, by and between
American Artists Film Corporation
and Ben Noble for an unsecured revolving line of credit
10.62 Amendment to Promissory Note, dated as of July 31, 1997, issued
to Glen C. Warren (Amendment of Exhibit 10.58)
10.63 Amendment to Promissory Note, dated as of July 31, 1997, issued
to Glen C. Warren (Amendment of Exhibit 10.60)
10.64 Termination Letter, dated October 31, 1996, to Atlantic
International Capital, Ltd.
27.1 American Artists Film Corporation Financial Data Schedule
- ------------------------------------
* Certain of the exhibits to this Report, indicated by an asterisk, are
incorporated by reference to other documents on file with the Securities and
Exchange Commission with which they were physically filed, to be part of hereof
as of their respective dates. Documents to which reference is made are as
follows:
(1) Registration Statement on Form SB-2 (File No. 33-97196C) of Setab Alpha,
Inc., filed on September 16, 1996.
(2) Registration Statement on Form S-4 (File No. 333-4159) of Setab Alpha, Inc.,
filed September 16, 1996.
(3) Annual Report on Form 10-KSB (File No. 000-20759) of American Artists Film
Corporation for the year ended July 31, 1996.
(B) REPORTS ON FORM 8-K.
No reports on form 8-K have been filed by the Company during the quarter
ended July 31, 1997.
-24-
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: November 7, 1997
AMERICAN ARTISTS FILM CORPORATION
By: /s/ Steven D. Brown
-----------------------------------
Steven D. Brown
Chief Executive Officer and
Chairman of the Board
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
/s/ Rex Hauck Director and Co-President November 7, 1997
- ---------------------------
Rex Hauck
/s/ Vivian W. Jones Director and Co-President November 7, 1997
- ---------------------------
Vivian W. Jones
/s/ Robert A. Martinez Vice President/Finance, Chief November 7, 1997
- --------------------------- Financial Officer and Treasurer
Robert A. Martinez
/s/ John W. Boyd Director November 7, 1997
- ---------------------------
John W. Boyd
/s/ Malcolm C. Davenport, V Director November 7, 1997
- ---------------------------
Malcolm C. Davenport, V
/s/ Dan W. Holloway Director November 7, 1997
- ---------------------------
Dan W. Holloway
/s/ Norman J. Hoskin Director November 7, 1997
- ---------------------------
Norman J. Hoskin
/s/ Ben E. Noble Director November 7, 1997
- ---------------------------
Ben E. Noble
/s/ Glen C. Warren Director November 7, 1997
- -------------------------
Glen C. Warren
-25-
<PAGE>
AMERICAN ARTISTS FILM CORPORATION
AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-2
CONSOLIDATED BALANCE SHEETS F-3
CONSOLIDATED STATEMENTS OF OPERATIONS F-5
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY F-6
CONSOLIDATED STATEMENTS OF CASHFLOWS F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-8
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
American Artists Film Corporation
Atlanta, Georgia
We have audited the accompanying consolidated balance sheets of American Artists
Film Corporation and Subsidiaries as of July 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
American Artists Film Corporation and Subsidiaries as of July 31, 1997 and 1996,
and the consolidated results of their operations and their cash flows for each
of the years then ended, in conformity with generally accepted accounting
principles.
BDO SEIDMAN, LLP
Atlanta, Georgia
November 5, 1997
F-2
<PAGE>
AMERICAN ARTISTS FILM CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 31,
------------------------------------------------
1997 1996
------------------- ---------------------
<S> <C> <C>
ASSETS
CASH $ 31,379 $ -
ACCOUNTS RECEIVABLE 508,837 107,457
FILM COSTS, NET OF ACCUMULATED AMORTIZATION (NOTE 1) 493,912 475,877
PROPERTY AND EQUIPMENT, NET (NOTES 1 AND 2) 41,193 52,128
GOODWILL, NET OF ACCUMULATED AMORTIZATION (NOTE 1) 117,429 156,572
DEFERRED OFFERING COSTS (NOTE 1) - 105,000
ADVANCES TO OFFICERS (NOTE 1) 220,719 217,247
OTHER (NOTE 1) - 112
------------------- ---------------------
$ 1,413,469 $ 1,114,393
=================== =====================
Se accompanying notes to consolidated financial statements.
</TABLE>
F-3
<PAGE>
AMERICAN ARTISTS FILM CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
July 31,
---------------------------------------------------
1997 1996
---------------------- ---------------------
<S> <C> <C>
LIABILITIES
Accounts payable 342,860 $ 169,781
Accrued expenses 72,087 112,115
Accrued accounting and legal 193,510 152,985
Accrued compensation and payroll taxes 108,703 103,630
Deferred revenue - 11,867
Notes payable (Note 2) 316,128 76,976
Notes payable/related parties (Note 3) 155,000 -
---------------------- ---------------------
TOTAL LIABILITIES 1,188,288 627,354
---------------------- ---------------------
MINORITY INTEREST (NOTE 1) 50,000 50,000
CONTINGENCIES
STOCKHOLDERS' EQUITY (NOTE 4)
Preferred stock - shares authorized 10,000,000; none issued - -
Preferred stock, $.001 par - shares authorized 10,000,000;
none issued - -
Common Stock, $.001 par:
Class A - shares authorized 20,000,000; issued and
outstanding 876,620 877 -
Class B - shares authorized 20,000,000; issued and
outstanding 5,502,277 5,502 -
Common stock, par value $.05 per share - shares authorized
30,000,000; issued and outstanding none and 9,407,837 - 470,392
Additional paid-in capital 2,908,117 2,125,117
Unamortized advertising credits (122,618) (122,618)
Accumulated deficit (2,616,697) (2,035,852)
---------------------- ---------------------
TOTAL STOCKHOLDERS' EQUITY 175,181 437,039
---------------------- ---------------------
1,413,469 $ 1,114,393
---------------------- ---------------------
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE>
AMERICAN ARTISTS FILM CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended July 31,
---------------------------------------------------
1997 1996
---------------------- --------------------
<S> <C> <C>
REVENUES
Commercial production $3,469,655 $ 1,689,644
Film revenues (Note 1) 420,937 21,995
---------------------- --------------------
3,890,592 1,711,639
---------------------- --------------------
COSTS AND EXPENSES
Cost of commercial production 2,656,064 1,330,604
Film cost amortization 362,214 15,963
Selling, general and administrative 1,347,413 1,351,227
---------------------- --------------------
4,365,691 2,697,794
---------------------- --------------------
LOSS FROM OPERATIONS (475,099) (986,155)
Interest expense 15,746 6,777
Other expense (Note 6) 90,000 -
Equity in net loss of
Diversity Filmworks, Inc. (Note 1) - 194,006
---------------------- --------------------
NET LOSS $ (580,845) $(1,186,938)
---------------------- --------------------
NET LOSS PER SHARE $(.09) $(.22)
---------------------- --------------------
WEIGHTED AVERAGE COMMON
SHARES AND EQUIVALENT SHARES
OUTSTANDING (NOTE 1) 6,172,977 5,305,652
---------------------- --------------------
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE>
AMERICAN ARTISTS FILM CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Class A Class B Total
Common Stock Common Stock Common Stock Additional Unamortized Accumulated Stock-
Paid-In advertising Deficit holders'
Shares Amount Shares Amount Shares Amount Capital credits Equity
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - July 31,
1995 - $ - - $ - 8,368,220 $ 418,411 $1,221,397 $(122,618) $ (848,914) $ 668,276
Issuances of common
stock - - - - 1,039,617 51,981 903,720 - - 955,701
Net loss - - - - - - - - (1,186,938) (1,186,938)
---------------------------------------------------------------------------------------------------------------
Balance - July 31,
1996 - $ - - $ - 9,407,837 $ 470,392 $2,125,117 $(122,618) $(2,035,852) $ 437,039
Merger with Setab
Alpha, Inc.
accounted for as a
recapitalization
(Note 1):
Recapitalization
of outstanding
common stock 12,600 13 5,502,277 5,502 (9,407,837) (470,392) 464,877 - - -
Acquisition of net
assets of Setab
Alpha, Inc. 700,020 700 - - - - (700) - - -
Offering costs - - - - - - (105,000) - - (105,000)
Issuances of common
stock (Note 4(b)) 164,000 164 - - - - 409,836 - - 410,000
Award of stock
options (Note 4(a)) - - - - - - 13,987 - - 13,987
Net loss - - - - - - - - (580,845) (580,845)
---------------------------------------------------------------------------------------------------------------
Balance - July 31,
1997 876,620 $877 5,502,277 $5,502 - - $2,908,117 $(122,618) $(2,616,697) $ 175,181
================================================================================================================
See accompany notes to consolidated financial statements
</TABLE>
F-6
<PAGE>
AMERICAN ARTISTS FILM CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended July 31,
-------------------------------------------------
1997 1996
-------------------- --------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss (580,845) $(1,186,938)
Adjustments to reconcile net loss to cash used in operating
activities:
Film costs amortization 362,214 15,963
Depreciation and amortization 59,425 63,354
Award of stock options 13,987 -
Loss on disposition of assets - 2,622
Equity in net income of Diversity Filmworks, Inc. - 194,006
Changes in assets and liabilities:
Accounts receivable (401,380) 79,336
Film costs additions (380,249) (76,119)
Other assets (3,360) (227,890)
Accounts payable 173,079 (9,292)
Accrued expenses 5,570 157,169
Film revenues participations - (41,910)
Deferred revenue (11,867) (44,436)
-------------------- --------------------
Cash used in operating activities (763,426) (1,074,135)
INVESTING ACTIVITIES
Capital expenditures (9,347) -
-------------------- --------------------
FINANCING ACTIVITIES
Repayment of notes payable (140,848) (53,763)
Borrowings under notes payable 535,000 -
Issuances of common stock 410,000 955,701
Minority interest - 50,000
-------------------- --------------------
Cash provided by financing activities 804,152 951,938
NET INCREASE (DECREASE) IN CASH 31,379 (122,197)
CASH, beginning of year - 122,197
-------------------- --------------------
CASH, end of year 31,379 -
==================== ====================
</TABLE>
See accompanying notes to consolidated financial statements
F-7
<PAGE>
AMERICAN ARTISTS FILM CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
American Artists Film Corporation ("American Artists," and together with its
subsidiaries "AAFC Group"), directly and through its subsidiaries, engages in
the development, production and exploitation of made-for-television and feature
length motion pictures, and in the commercial contract productions of film
products, principally television commercials. The Company classifies its
operations in two business segments: (i) film development and production and
(ii) contract production. The Company's film development and production
operations involve the granting of credit to film exhibitors and distributors.
The Company's contract production operations involve the granting of credit to
advertising agencies that represent clients in various industries.
During fiscal 1997, the Company incurred developmental and organizational
expenses for a new business segment focused on the development and operation of
a network of Large Screen Video Display ("LSVD") units. This segment is in the
developmental stages and has not generated revenues nor incurred a significant
amount of expenses.
The Company obtains its revenues from discrete project assignments obtained
from various clients. Accordingly, while the fees from one or more clients may,
in any one year, be significant as the result of the size of a project
undertaken for that client, the Company is not dependent on any one client for a
material amount of its revenues. During fiscal 1997, three of the Company's
customers accounted for fees equal to 21.2%, 19.7% and 12.2% of consolidated
revenues. During fiscal 1996, three of the Company's customers accounted for
fees equal to 18.5%, 12.5% and 10.3% of consolidated revenues.
The Company incurred net losses of $580,845 and $1,186,938 for the years ended
July 31, 1997 and 1996. These losses have been historically funded through
private placements of equity securities and loans made available by members of
the board of directors, accordingly, the Company's continuing operations have
been dependent upon such fundings. The Company anticipates that future net
losses, if any, would be funded by these same means.
The Company has had discussions concerning additional private placements of
its debt or equity securities, and as a result thereof, believes that there will
be available sufficient capital to finance its business plans for fiscal 1998.
However, there can be no assurances that any such debt or equity financing will
be available to the Company, or if available, that such financing would be
available on terms considered acceptable to the Company. The inability to
obtain such equity or debt financing as needed would require the Company to
materially reduce the scope of its operations.
MERGER WITH SETAB ALPHA, INC.
On October 7, 1996 the Company completed a merger (the "Merger") with Setab
Alpha, Inc. ("Setab") whereby Setab acquired 100 percent of the outstanding
common stock of American Artists Film Corporation ("Old American Artists") in
exchange for the issuance of 12,600 shares of the Setab's Class A common stock
and 5,502,277 shares of Setab's Class B common. The consummation of the Merger
was conditioned upon, among other things, Setab's completion of its public
offering, with not fewer than 200 shareholders. Setab completed its public
offering on October 7, 1997 and upon completion of the Merger, Setab as the
surviving corporation, changed its name to American Artists Film Corporation.
The Merger resulted in the issuance of a controlling interest in Setab to the
stockholders of Old American Artists. Because of this, and because Setab did
not have any material operations, the Merger was accounted for as a
recapitalization of Old American Artists in which (i) Old American Artists is
deemed to have (a) created a second class of common stock, such that its
authorized capital consisted of Class A and Class B common stock, each with a
par value of $.001, and (b) exchanged for the outstanding shares of its common
stock, an aggregate of 12,600 shares of Class A common stock and 5,502,277
shares of Class B common stock, and (ii) issued 700,020 shares of Class A
F-8
<PAGE>
AMERICAN ARTISTS FILM CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
common stock (representing the number of shares outstanding after the completion
of Setab's public offering) in exchange for the net assets of Setab, recorded at
their historical costs.
The Merger effectively resulted in a reverse split of the Company's common
stock on a basis of .5862 to 1. The effects of this reverse split has been
retroactively applied to the earliest periods presented for all share and per
share amounts related to the Company's outstanding common stock, stock options
and warrants
Old American Artists (referred to hereinafter and previously as the "Company")
is the continuing entity for accounting and financial reporting purposes, and
accordingly the results of operations to be reported for periods prior to the
Merger are those of the Company. Earnings (loss) per share for periods prior to
the recapitalization have been computed giving retroactive effect to the
recapitalization of Old American Artists' outstanding common stock. Setab had
no material operations, and as a result the pro forma results of operations
would not differ materially from the Company's historical results of operations.
Accordingly, pro forma results of operations are not presented.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of American Artists
and First Light Entertainment Corporation ("First Light"), a wholly-owned
subsidiary, Diversity Filmworks, Inc. ("Diversity"), a 49% owned subsidiary and
Millennium Group, L.L.C. ("Millennium"), as discussed further below.
Diversity was formed by American Artists and a qualified minority owner to
engage in contract production as a qualified minority contractor. In
anticipation of the Merger, in September 1996, the Company and the other
stockholder of Diversity entered into an agreement concerning the size and
composition of Diversity's board of directors. As a result, effective August 1,
1996, the Company consolidated the accounts of Diversity in its consolidated
financial statements.
Prior to August 1, 1996, the Company accounted for its 49% interest in
Diversity using the equity method of accounting, under which the Company's
interests in Diversity's operating results were presented as a single, separate
line item in the consolidated statements of operations, and the Company's net
investment in and advances to Diversity were presented as a single item in the
consolidated balance sheet. Revenues, as reflected in the consolidated
statement of operations, did not include the revenues of Diversity. As a
result, the consolidated financial statements for fiscal 1997 will lack
comparability in certain respects to the consolidated financial statements for
fiscal 1996.
Millennium is a limited liability corporation over which the company exercises
control through its capacity as manager, which position allows it to direct the
operations of Millennium, its purchase and sale of assets, issuance of debt or
equity securities, and execution of contracts and agreements, without the
approval of the other stockholders. Millennium was formed to produce and
distribute a sixty minute video. American Artists will be entitled to (i) 50%
of net income after the minority stockholders have recovered their investment up
to a point where the minority stockholders have received a 200% return and (ii)
90% thereafter. As of July 31, 1997, Millennium's activities have been limited
to organization and pre-production story development. The minority interest at
July 31, 1997 relates to Millennium.
In accordance with Statement of Financial Accounting Standards No. 53
"Financial Reporting by Producers and Distributors of Motion Picture Films"
("SFAS No. 53"), AAFC Group presents an unclassified balance sheet.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-9
<PAGE>
AMERICAN ARTISTS FILM CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INVESTMENT IN DIVERSITY FILMWORKS, INC.
American Artists accounted for its investment in Diversity using the equity
method of accounting in fiscal 1996. Diversity's net losses were financed by
American Artists, and accordingly, in fiscal 1996 American Artists recorded 100%
of Diversity's losses. Diversity had revenues of $777,309 and operating
expenses of $971,315 resulting in a net loss of $194,006 for the year ended July
31, 1996.
Effective July 31, 1996, American Artists and Diversity executed an agreement
that changed, retroactively to August 1, 1995, the manner in which certain of
American Artists operating expenses were allocated and charged to Diversity. As
a result, expenses of $151,308 relating to the first three quarters of fiscal
1996 were charged to Diversity in the fourth quarter of fiscal 1996. The change
had no effect on the consolidated net loss as American Artists recorded 100% of
Diversity's loss.
FILM COSTS AND REVENUES
Cost incurred to develop stories, acquire story rights, produce and print
films, and advertising or other distribution costs which benefit future markets,
are capitalized as film costs when incurred. All other advertising and
distribution costs are expensed as incurred.
AAFC Group finances certain of its projects by granting revenue participations
to outside investors in exchange for investments in the production of the film.
Capitalized film costs are reduced by the financing provided under these
arrangements.
Capitalized film cost are amortized using the individual film forecast method
under which capitalized costs are amortized based on the relationship between
the gross revenue realized and the estimate of the total gross revenues to be
earned by the film over its life. Revenue estimates are reviewed periodically
and, when appropriate, are revised. Where unamortized film costs exceed a
revised estimate of total future gross revenues, film costs are written down to
net realizable value.
The components of capitalized film costs were as follows:
<TABLE>
<CAPTION>
July 31,
--------------------------------------
1997 1996
--------------------------------------
<S> <C> <C>
Released $ 1,185,560 $ 867,256
Accumulated amortization (1,174,643) (812,429)
--------------------------------------
10,917 54,827
In production 34,181 128,366
In development 448,814 292,684
--------------------------------------
$ 493,912 $ 475,877
--------------------------------------
</TABLE>
The above amounts do not include any value for four developed scripts
contributed to AAFC Group in 1991 by its founding stockholders in exchange for
common stock. In accordance with generally accepted accounting principles, the
scripts were recorded at zero, which, because no amounts had been expended for
the development of the scripts, represented the cost basis of the contributing
stockholders, and the stated value of the common shares issued, $238,000, was
charged against additional paid-in capital.
F-10
<PAGE>
AMERICAN ARTISTS FILM CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In general, the majority of the revenue to be derived from a film will be
earned during the two to three years following its release. On the basis of
American Artists' current production projections, which could change in the
future based on the availability of production funding, film demand and other
factors, 40% of the unamortized film costs will be amortized over the two year
period that will end July 31, 1999 and 60% will amortized over the three year
period that will end July 31, 2000.
Film revenues are recognized, in accordance with SFAS No. 53, generally when
the film has been accepted by the licensee, where applicable, collection of
license fee is reasonably assured, and the film is exhibited or is available for
distribution in the applicable market. Films are generally first exhibited in
television markets, and then are distributed on videotape. Revenues from the
foreign exhibition or sale of films are denominated in U.S. dollars. Minimum
guaranteed amounts from video license agreements, and from book royalties, are
recognized when the applicable license period begins and the film or book is
available to the distributor; amounts in excess of the minimum guarantee are
recognized when earned. Revenues are reduced for amounts payable on account of
revenue participations, which are accrued on the same basis as film costs are
amortized.
The components of film revenues were as follows:
<TABLE>
<CAPTION>
Year Ended July 31,
-------------------------------------
1997 1996
-------------------------------------
<S> <C> <C>
Television $406,991 $ -
Foreign video 13,946 21,995
-------------------------------------
$420,937 $ 21,995
=====================================
</TABLE>
COMMERCIAL PRODUCTION
AAFC Group produces film products, primarily television commercials, for
customers under fixed fee arrangements, which typically are less than two months
in duration. Revenues and cost attributed to these contracts are recognized
over the life of the contract using percentage-of-completion of accounting.
Under that method, revenue and related costs are recognized based on the
percentage of the contract completed, which is estimated on the basis of the
relationship of the costs incurred to total estimated costs, except that
provision is made currently for the full amount of any anticipated losses on
contracts in progress.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided using the
straight-line method over the estimated life of the related asset. The
components of property and equipment are as follows:
<TABLE>
<CAPTION>
Useful July 31,
--------------------------------------
Lives 1997 1996
--------------------------------------------------
<S> <C> <C> <C>
Office furniture and fixtures 5 - 7 years $ 89,362 $ 80,015
Leasehold improvements 4 months 35,000 35,000
Production equipment 5 - 7 years 7,498 7,498
--------------------------------------
131,860 122,513
Less accumulated depreciation and
amortization (90,667) (70,385)
---------------------------------------
$ 41,193 $ 52,128
=======================================
</TABLE>
F-11
<PAGE>
AMERICAN ARTISTS FILM CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ADVANCES TO OFFICERS
AAFC Group has, on certain occasions, made cash advances to certain officers
which generally bear interest at 7% per annum. Management anticipates that
these advances will be repaid through their offset against future compensation.
GOODWILL
Goodwill results from American Artists' 1993 acquisition of 100% of the common
stock of First Light. The goodwill is being amortized on a straight-line basis
over seven years. AAFC Group annually assesses the recoverability of the
unamortized goodwill by comparison to projections of undiscounted cash flows
from First Light's operations over the remaining amortization period.
DEFERRED OFFERING COSTS
Deferred offering costs were comprised principally of audit and other fees
incurred in connection with AAFC Group's merger with Setab Alpha, Inc. Such
costs were charged against stockholders' equity as a result of the completion of
the merger in October 1996.
UNAMORTIZED ADVERTISING COSTS
In fiscal 1992 AAFC Group issued shares of its common stock in exchange for
advertising credits that entitle AAFC Group to purchase media advertising credit
having an aggregate "standard cost" value of $500,000. The credits were
recorded on the basis of $0.85 per share, based on per share prices in issuances
of shares of common stock for cash during the same period. The unamortized
advertising credits are presented as a reduction of stockholders' equity
reflecting the acquisition of the credits for common stock. The recoverability
of the advertising credits is assessed based on the current market price for
similar advertising and AAFC Group's ability to utilize the credits. The
credits may be used by AAFC Group through December 31, 1998.
INCOME TAXES
AAFC Group files a consolidated income tax return and provides for income
taxes under Statement of Financial Accounting Standards No. 109 "Accounting for
Income Taxes." Under that standard, deferred income taxes are provided on the
difference between the financial reporting and tax bases of assets and
liabilities. A valuation allowance is provided to the extent that management
estimates that it is not more likely than not that the benefit of deferred tax
assets will be realized.
EARNINGS PER SHARE
Earnings per share are computed on the basis of the weighted average common
shares and dilutive common share equivalents outstanding. Common stock
equivalents consist of outstanding stock options and warrants.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are generally comprised of demand deposits and time
deposits or highly liquid debt instruments with original maturities of three
months or less. The Company's cash balances do not involve any significant
concentrations of credit risk.
F-12
<PAGE>
AMERICAN ARTISTS FILM CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company believes that the estimated fair values of its financial
instruments, which are notes payable, approximates the carrying values of such
financial instruments in all material respects. The carrying value of notes
payable approximates fair value since these notes substantially bear interest at
floating rates based upon the lenders "prime" rate.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share ("SFAS No. 128").
SFAS No. 128, which is effective for periods ending after December 15, 1997,
revises the manner in which earnings per share is calculated and requires the
restatement, when first applied, of prior period earnings per share data. The
Company will initially apply SFAS No. 128 in the first quarter of fiscal 1998.
Upon the adoption of SFAS No. 128, the Company will restate previously reported
earnings per share data. The Company has not yet determined what effect, if
any, the restatement will have on previously reported data.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS
130"), which establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is
defined to include all changes in equity, except those resulting from
investments by owners and distributions to owners. Among other disclosures,
SFAS 130 requires that all items that are required to be recognized under
current accounting standards as components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as other
financial statements.
SFAS 130 is effective for financial statements for periods beginning after
December 15, 1997 and requires comparative information for earlier years to be
restated. Because of the recent issuance of this standard, management has been
unable to fully evaluate the impact, if any, the standard may have on future
financial statement disclosures. Results of operations and financial position,
however, will be unaffected by implementation of this standard.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information ("SFAS 131"), which supersedes Statement of
Financial Accounting Standards No. 14, Financial Reporting for Segments of a
Business Enterprise. SFAS 131 establishes standards for the manner in which
public companies report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas and major customers. SFAS 131 defines operating segments as
components of a company about which separate financial information is available
that is evaluated regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance.
SFAS 131 is effective for financial statements for periods beginning after
December 15, 1997 and requires comparative information for earlier years to be
restated. Because of the recent issuance of this standard, management has been
unable to fully evaluate the impact, if any, the standard may have on future
financial statement disclosures. Results of operations and financial position,
however, will be unaffected by implementation of this standard.
F-13
<PAGE>
AMERICAN ARTISTS FILM CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - NOTES PAYABLE
Notes payable consisted of the following:
<TABLE>
<CAPTION>
July 31,
-------------------------------------
1997 1996
-------------------------------------
<S> <C> <C>
Line of credit with a bank, guaranteed by
certain members of the board
of directors, interest at
the prime rate (8.5% at July 31, 1997)
plus 1%, due quarterly,
principal due July 1998 $225,000 $ -
Unsecured installment note payable to bank,
interest at 8.75%, monthly principal and
interest of $3,000, principal
due November 1997 64,055 -
Secured installment note, collateralized by
equipment and tradename of First Light,
due with interest at
4.37% in quarterly installment of
$5,593 through August 1998 27,073 47,696
Unsecured installment note payable to bank,
interest at the prime rate plus 1%,
monthly principal and
interest, due March 1997 - 29,280
-------------------------------------
$316,128 $76,976
=====================================
</TABLE>
The line of credit, which is unsecured, provides for maximum borrowings not to
exceed $225,000. Borrowings outstanding under this line of credit amounted to
$225,000 at July 31, 1997. In consideration for establishing the line of
credit, the Company issued, in October 1997, certain members of the board of
directors common stock purchase warrants allowing for the purchase, in the
aggregate, of 45,000 shares of Class A common stock, priced at $4.58 per share,
through June 30, 2000.
In July 1996 a member of the board of directors, as a co-signer on the note
payable to bank, established a three month line of credit in favor of the
Company for borrowings not to exceed $75,000. The initial terms of this line of
credit were agreed to in May 1996 in return for the issuance of 28,208 Class B
common stock options, with an exercise price of $1.71, exercisable through June
30, 2000. In November 1996, the Company converted this line of credit into a
six-month note due May 1997 and received an additional six month extension to
November 1997.
Aggregate maturities of notes payable are as follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $310,593
1999 5,535
------------------
$316,128
==================
</TABLE>
F-14
<PAGE>
AMERICAN ARTISTS FILM CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - NOTES PAYABLE/RELATED PARTIES
Notes payable to related parties consisted of the following:
<TABLE>
<CAPTION>
July 31,
-------------------------------------
1997 1996
-------------------------------------
<S> <C> <C>
Line of credit with member of the board of
directors, interest at the prime rate
(8.5% at July 31, 1997) plus
1%, due monthly, principal due 100,000 -
July 1998
Unsecured notes due certain member of board
of directors, due on demand
but no later than 55,000 -
August 1998, interest at the prime rate
plus 1%
-------------------------------------
$155,000 -
=====================================
</TABLE>
The line of credit, which is unsecured, provides for maximum
borrowings not to exceed $100,000. Borrowings outstanding under this line of
credit amounted to $100,000 at July 31, 1997. In consideration for establishing
the line of credit, the Company issued, in October 1997, this member of the
board of directors common stock purchase warrants allowing for the purchase of
20,000 shares of Class A common stock, priced at $4.58 per share, through June
30, 2000.
In September 1996, three shareholders, two of whom are members of the
board of directors, loaned the Company $75,000. These notes were due on demand,
but no later than August 1997, and bore interest at the prime rate plus 1%. The
Company re-paid $50,000 of these loans in February and June of 1997. The
maturity date of the remaining note was extended to August 1998. In
consideration of the original loans, the Company issued each shareholders an
option to purchase 9,403 shares of Class B common stock at a price of $1.71,
exercisable through June 30, 2000.
In April 1997, a board of director member made a non-interest bearing
advance amounting to $30,000 to the Company, which was repaid in April 1997.
This board of director member also made a loan of $30,000, bearing interest at
the prime rate plus 1%, to the Company in June 1997. This note was settled by
the Company in August 1997.
Aggregate maturities of notes payable/related parties amount to $155,000 in
the year ending July 31, 1998.
NOTE 4 - STOCKHOLDERS' EQUITY
(A) STOCK OPTIONS
AAFC Group adopted a stock option plan in 1991 which, as revised,
permits the issuance of stock options for the purchase of up to 4 million shares
of American Artists' common stock. Stock options may be granted to officers,
directors, employees and consultants and may be either "incentive stock options"
(as defined in the Internal Revenue Code) or non-qualified stock options. Stock
options are generally granted at an exercise price equal to the grant date fair
value of American Artists' common stock, and vest at varying rates over periods
ranging from one to four years.
F-15
<PAGE>
AMERICAN ARTISTS FILM CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In December 1995, AAFC Group replaced its existing stock option plan with the
1995 stock option plan ("1995 Option Plan"). The 1995 Option Plan allows for the
issuance of up to 2.5 million stock options as either incentive stock options,
non-qualified stock options, or stock appreciation rights. Stock options are
generally granted at an exercise price equal to the grant date fair value of
American Artists' common stock, and vest at varying rates over periods ranging
from one to ten years, with certain grants contingent upon continued service
with the Company.
The Company adopted, effective August 1, 1996, the disclosure-only
provisions of Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" ("SFAS 123"), but applies Accounting Principles
Board Opinion No. 25 and related interpretations in accounting for its stock
option plan. The Company recognized compensation costs of $13,987 related to
awards of stock options for the year ended July 31, 1997.
The following summarizes stock option activity:
<TABLE>
<CAPTION>
Weighted
average exercise
Number of options price
-----------------------------------------
<S> <C> <C>
Outstanding, August 1, 1995 1,005,333 $0.81
Granted 1,056,415 1.70
Exercised - -
Forfeited or expired (128,379) 1.94
--------------------------------------
Outstanding, July 31, 1996 1,933,369 1.22
Granted 503,673 3.88
Exercised - -
Forfeited or expired (17,587) 1.54
--------------------------------------
Outstanding, July 31, 1997 2,419,455 1.77
======================================
Options exercisable at:
July 31, 1996 747,405 $0.87
--------------------------------------
July 31, 1997 1,677,504 $1.16
======================================
</TABLE>
Options exercisable at July 31, 1997 were as follows:
<TABLE>
<CAPTION>
Weighted
Number of average
options Option price exercise price
-------------------------------------------------
<S> <C> <C>
64,482 $0.085 $0.085
879,300 0.85 0.85
650,902 1.45 to 1.71 1.51
77,820 2.56 2.56
5,000 $ 4.00 4.00
----------------
1,677,504 $ 1.16
================
</TABLE>
F-16
<PAGE>
AMERICAN ARTISTS FILM CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Options outstanding at July 31, 1997 were as follows:
<TABLE>
<CAPTION>
Weighted
Average
Remaining Weighted
Number of Contractual average
options Life in Years Option price exercise price
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
82,068 5.00 $0.085 $0.085
879,300 6.09 0.85 0.85
838,853 3.42 1.45 to 1.71 1.50
413,993 7.10 2.56 to 3.75 3.19
205,241 2.99 4.00 to $ 4.75 4.65
----------------
2,419,455 5.04 $ 1.77
================
</TABLE>
If the Company had elected to recognize compensation costs based on
the fair value at the grant date of options issued under the plan described
above, consistent with the method prescribed by SFAS 123, net loss and net loss
per share would have been changed to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Year Ended July 31,
--------------------------------------
1997 1996
--------------------------------------
<S> <C> <C>
Net loss
As reported (580,845) (1,186,938)
Pro forma (733,689) (1,210,386)
Net loss per share
As reported (.09) (.22)
Pro forma (.12) (.23)
</TABLE>
The weighted average grant date fair value of options, calculated
using the Black-Scholes option pricing model, was as follows:
<TABLE>
<CAPTION>
Year Ended July 31,
1997 1996
-------------------------------------
<S> <C> <C>
Options granted at market price $272,434 $286,432
Options granted at above market price $ 1,200 $ -
</TABLE>
The significant weighted average assumptions used to estimate the fair
value of stock options for the years ended July 31, 1997 and 1996 were: risk-
free interest rate of 6.5%, an expected option life of four years and no
dividend yield. A trading market for the Company's common stock has not
developed, therefore, the minimum value method was used in estimating fair
value.
F-17
<PAGE>
AMERICAN ARTISTS FILM CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(B) COMMON STOCK PURCHASE WARRANTS
During fiscal 1997, American Artists completed a private placement of
16.4 units priced at $25,000 per unit ($2.50 per share), with each unit
comprised of 10,000 shares of its Class A common stock and 3,333 Class A common
stock purchase warrants. American Artists issued 54,663 Class A common stock
purchase warrants under this private placement in fiscal 1997.
During fiscal 1996, American Artists completed two private placements
of units comprised of common stock and Class B common stock purchase warrants.
American Artists completed a private placement in fiscal 1996, initially started
in fiscal 1995, of 15.7 units priced at $25,000 per unit ($1.45 per share), with
each unit comprised of 17,241 shares of common stock and 8,621 Class B common
stock purchase warrants. The Company issued 135,347 Class B common stock
purchase warrants under this private placement in fiscal 1996.
The second private placement consisted of units priced at $25,000 per
unit ($1.71 per share), comprised of 14,655 shares of common stock and 7,328
Class B common stock purchase warrants. American Artists completed a private
placement of 22.55 units and issued 165,265 Class B commons stock purchase
warrants in fiscal 1996.
Outstanding warrants were as follows:
<TABLE>
<CAPTION>
Shares
------------------
<S> <C>
Outstanding, August 1, 1995 17,242
Issued 300,612
Exercised -
Forfeited -
------------------
Outstanding, July 31, 1996 317,854
Issued 54,663
Exercised -
Forfeited -
------------------
Outstanding, July 31, 1997 372,517
==================
</TABLE>
Warrants outstanding at July 31, 1997 were as follows:
<TABLE>
<CAPTION>
Warrants Exercisable
Exercise Price Outstanding Through
--------------------------------------------------
<S> <C> <C> <C>
$2.56 to $3.41 317,854 June 1998
$3.00 54,663 June 2000
</TABLE>
(C) SUBSEQUENT EVENTS
In August 1997, a member of the board of director purchased 36,364
shares of common stock for an aggregate price of $100,000. In connection with
this purchase, the Company also issued a common stock purchase warrant allowing
for the purchase of 37,000 shares of Class A common stock at $2.80 per share,
exercisable through June 30, 2000.
F-18
<PAGE>
AMERICAN ARTISTS FILM CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In October 1997, the Company issued a member of the board of directors
a common stock purchase warrant for the purchase of 40,000 shares of Class A
common stock at $4.58 per share, exercisable through June 30, 2000, in
consideration for his election to join the board in March 1997
NOTE 5 - INCOME TAXES
Deferred tax assets result from the following temporary differences between
book and tax bases of assets:
<TABLE>
<CAPTION>
July 31,
--------------------------------------
1997 1996
--------------------------------------
Deferred tax assets:
<S> <C> <C>
Investment in Diversity Filmworks, Inc. 164,000 97,000
Net operating loss carryforwards 800,000 647,000
Valuation allowance (964,000) (744,000)
--------------------------------------
- -
======================================
</TABLE>
The effective tax rate differed from the U.S. statutory federal income tax
rate as a result of the following:
<TABLE>
<CAPTION>
Year Ended July 31,
---------------------------------------
1997 1996
---------------------------------------
<S> <C> <C>
U.S. statutory federal income tax rate (34%) (34%)
Valuation allowance 34% 34%
---------------------------------------
Effective tax rate - -
=======================================
</TABLE>
AAFC Group has net operating loss carryforwards for federal tax
purposes amounting to approximately $2,105,000 at July 31, 1997. These
net operating loss carryforwards expire principally in fiscal years 2008 through
2012. As a result of such net operating loss carryforwards and the related 100%
valuation allowance, AAFC Group has not provided a provision for income taxes
for the years ended July 31, 1997 and 1996.
NOTE 6 - SETTLEMENT OF ARBITRATION
The Company was involved in an arbitration with one of its co-
producers concerning the accounting for costs and revenues received by each
company relating to two co-produced network television specials.
The Company executed an agreement (the "Agreement") in June 1997 in
settlement of all known issues related to this arbitration. Under the
Agreement, the Company agreed to pay the co-producers $140,000, of which $50,000
was accrued at July 31, 1996 with the balance accrued at July 31, 1997, over a
period of fourteen months commencing in June 1997. The Agreement provides for a
stipulated abitral award of $190,000 upon default by the Company of the payment
arrangements outlined in the Agreement.
F-19
<PAGE>
AMERICAN ARTISTS FILM CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Agreement also calls for the Company to pay certain residuals
related to the two co-produced network television specials. The amount of these
residuals is not presently determinable, however, they are not considered to be
material to the Company's financial position, results of operations or cash
flows.
NOTE 7 - SEGMENT INFORMATION
Financial information by business segment is as follows:
<TABLE>
<CAPTION>
Development and Contract Production
1997 Film Production Consolidated
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues 420,937 3,469,655 3,890,592
Loss (income) from operations 621,138 (146,039) 475,099
Identifiable assets 561,091 600,280 1,161,371
Capital expenditures - 9,347 9,347
Depreciation and amortization 364,878 56,761 421,639
1996
- ---------------------------------------------
Revenues 21,995 1,689,644 1,711,639
Loss from operations 598,072 388,083 986,155
Identifiable assets 491,982 300,052 792,034
Capital expenditures - - -
Depreciation and amortization 21,013 58,304 79,317
</TABLE>
NOTE 8 - SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1997 1996
---------------------------------------
<S> <C> <C>
Cash paid for interest $ 8,221 $ 6,777
Cash paid for income taxes - -
---------------------------------------
$ 8,221 $ 6,777
=======================================
</TABLE>
(a) The Company completed the Merger, as described in Note 1, which
included a reverse split of the Company common stock, a non-cash transaction.
F-20
<PAGE>
15 October 1997
Alfred Haber Distribution, Inc.
Fred Haber
321 Commercial Avenue
Palisades Park, NJ 07650
RE: AMENDMENT TO THE AGREEMENT BY AND BETWEEN ALFRED HABER DISTRIBUTION,
INC. ("HABER") AND AMERICAN ARTISTS FILM CORPORATION ("AAFC") DATED
JULY 26, 1994 AS REVISED OCTOBER 10, 1994 (THE "AGREEMENT")
Dear Fred,
Per our conversation today, this will confirm the amendment mutually agreed
to by both parties for the above-referenced Agreement as follows:
1. The Term of the Agreement shall be extended from the expiration date of
August 1, 1997 to February 1, 1999.
2. Any and all monies payable to AAFC under the Agreement shall be divided
equally between AAFC and Greystone Communications, Inc., ("Greystone") with
separate checks for said monies to be issued by Haber to both AAFC and
Greystone.
3. Except as modified herein, the terms and conditions of the Agreement shall
remain in full force and effect and shall govern the respective rights and
obligations of the parties.
Shinaan Krakowski of Greystone Communications, Inc., has agreed to this
Amendment.
The parties acknowledge that they are bound by the terms and conditions of
this Amendment by signing as indicated below:
AMERICAN ARTISTS FILM CORPORATION
/s/ J. Eric Van Atta
By: _____________________________
ALFRED HABER DISTRIBUTION, INC.
/s/ Joy Haber
By:______________________________
<PAGE>
[LETTERHEAD OF AMERICAN ARTISTS FILM CORPORATION APPEARS HERE]
15 January 1997
VIA FACSIMILE
- -------------
Mr. Al Sander
Liberty Transfer Company
191 New York Avenue
Huntington, NY 11743
Tel: (516) 385-1616
RE: TERMINATION OF SERVICES FOR AMERICAN ARTISTS FILM
CORPORATION ("AAFC"), FORMERLY SETAB ALPHA, INC. ("SETAB")
Dear Al,
Per our conversations, the Resolution of Appointment Agreement dated August 12,
1996, by and between Setab and Liberty Transfer Company ("Liberty"), appointing
Liberty as the transfer agent for Setab was terminated on November 4, 1996.
All obligations pertaining to the above-referenced agreement have been fulfilled
by AAFC and, Liberty will have fulfilled all of its obligations once all the
appropriate records, documents and stock certificates pertaining to AAFC held by
them are delivered to AAFC's new transfer agent at the below address:
Mr. Roger Burnhammer
Continental Stock Transfer and Trust Company
2 Broadway
New York, NY 10004
Tel: (212) 509-4000
I appreciate all of your help and understanding in this matter.
Sincerely,
Very truly yours,
/s/ J. Eric Van Atta
-----------------------
J. Eric Van Atta
Vice President
\mjf
Enclosures
<PAGE>
[LETTERHEAD OF TURNER BROADCASTING SYSTEM, INC. APPEARS HERE]
November 13, 1996
VIA FEDERAL EXPRESS
- -------------------
American Artists Film Corp.
1245 Fowler Street, NW
Atlanta, Georgia 30318
Attn: Rex Hauck
Tel: (404)876-7373
Fax: (404)885-9831
RE: "TARGET EARTH"/TURNER ORIGINAL PRODUCTIONS, INC.
("TOP")
Dear Rex:
This letter, once fully executed, shall constitute an amendment (the
"Amendment") to the agreement ("Agreement") dated October 11, 1996 between TOP
and American Artists Film Corporation ("Producer") relating to the above-
referenced production (the "Program"). In consideration of the mutual promises
contained herein and the mutual benefits to be derived therefrom, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Producer and TOP hereby agree as follows:
1. The first sentence of Paragraph I.B. of the Agreement shall be deemed
deleted in its entirety and replaced with the following:
Producer developed a Budget for the Program which does not exceed
Three Hundred Sixty-Eight Thousand One Hundred Dollars ($368,100).
2. Unless otherwise expressly provided herein, all capitalized terms used in
this Amendment shall have the same meaning as ascribed in the Agreement.
3. Except as modified herein, the terms and conditions of the Agreement
shall remain in full force and effect and shall govern the respective
rights and obligations of the parties.
<PAGE>
American Artists Film Corp.
Attn.: Rex Hauck
November 13, 1996
Page 2
If the foregoing accurately reflects your understanding of this Amendment,
please sign each of the four (4) enclosed duplicate originals in the spaces
provided and return them to me for countersignature by an officer of TOP.
Sincerely,
/s/ Lee Brooks Rivera
Lee Brooks Rivera
Assistant General Counsel
Agreed and Accepted by:
AMERICAN ARTISTS FILM CORP.
By: /s/ J. Eric Van Atta
-----------------------------
Title: Vice President
--------------------------
TURNER ORIGINAL PRODUCTIONS, INC.
By: /s/ Pat Mitchell
-----------------------------
Title: President
--------------------------
LBR: sms
cc: Pat Mitchell
Louis Lettes
George Puckhaber
Vivian Schiller
<PAGE>
[LETTERHEAD OF ICON INTERNATIONAL, INC. APPEARS HERE]
October 20, 1997
Mr. Eric Van Atta
American Artists Film Corporation
1245 Fowler Street, N.W.
Atlanta, Ga. 30318
Dear Eric:
As discussed, we are in agreement to extend the expiration date of your $500,000
in Trade Credits to 12/31/98, and this letter so extends them.
I hope you are prospering, and we look forward to continuing our relationship.
Sincerely,
/s/ Lance Lundberg
------------------
Lance Lundberg
cc: R. Lellio
<PAGE>
AGREEMENT AND
CERTIFIED COPY OF RESOLUTION OF
BOARD OF DIRECTORS
OF
AMERICAN ARTISTS FILM CORPORATION
---------------------------------
_________________________
RESOLVED:
I. That Continental Stock Transfer & Trust Company of _________________
____________________________ be and hereby is appointed Transfer Agent of the
Class A Common Stock and Class B Common Stock of this Corporation.
II. That the Transfer Agent be and hereby is authorized to issue and
countersign certificates of said stock of this Corporation in such name and for
such numbers of shares up to the full amount of such stock which is authorized
but unissued and to deliver such certificates as may be directed by resolution
of the Board of Directors or by written order of the President or a Vice-
President and Secretary or Assistant Secretary or Treasurer and an opinion of
counsel in form and substance satisfactory to it and such other documentation as
it may require.
III. That the Transfer Agent be and hereby is authorized to accept for
transfer any outstanding certificates of said stock of this Corporation properly
endorsed and stamped as required by law, and to issue and countersign new
certificates for a like number of shares of the same class of stock in place
thereof and to deliver such new certificates.
IV. That the said Transfer Agent may use its own judgment in matters
affecting its duties hereunder and shall be liable only for its own gross
negligence, and that this Corporation indemnifies and holds harmless the said
Transfer Agent for each act done by it in good faith in reliance upon any
instrument or stock certificate believed by it to be genuine and to be signed,
countersigned or executed by any person or persons authorized to sign,
countersign or execute the same.
V. That any certificates of the said stock issued and countersigned by
the Transfer Agent shall bear the actual or facsimile signature of the present
or any future Chief Executive Officer and Secretary and the actual or facsimile
seal of this Corporation. Should any officer die, resign or be removed from
office prior to the issuance of any certificates of stock which bear his
signature, the Transfer Agent may continue, until written notice to the contrary
is received, to issue and register such certificates as and for the stock
certificates of this Corporation notwithstanding such death, resignation or
removal, and such certificates when issued shall continue to be and to
constitute valid certificates of stock of this Corporation.
VI. That the Transfer Agent shall issue a new certificate or
certificates of said stock in lieu of lost, destroyed or stolen certificate or
certificates of such stock upon the order of the Corporation, evidenced by a
certified copy of a resolution of the Board of Directors, or written direction
of the President or a Vice-President or Secretary or Treasurer, and upon the
giving of a bond satisfactory to the Transfer Agent and Registrar, protecting it
from any loss.
VII. That the Transfer Agent is authorized and directed to open and
maintain such ledgers and other books and to keep such records as may be
required or deemed advisable in the performance of its agency.
VIII. That this appointment and the authorizations in these resolutions
contained shall cover and include any additional shares of said class of stock
which may hereafter be authorized by this Corporation.
IX. That when certificates of this Corporation's stock shall be
presented to it for transfer, the Transfer Agent is hereby authorized to refuse
to transfer the same until it is satisfied that the requested transfer is
legally in order; and that this Corporation shall indemnify and hold harmless
the Transfer Agent, and the Transfer Agent shall incur no liability for the
refusal, in good faith, to make transfers which it, in its judgment, deems
improper or unauthorized. The Transfer Agent may rely upon the Uniform
Commercial Code and generally accepted industry practice in effecting transfers,
or delaying or refusing to effect transfers.
1
<PAGE>
X. That when the said Transfer Agent deems it expedient it may apply to
this Corporation, or the counsel for this Corporation, or to its own counsel for
instructions and advice; that this Corporation will promptly furnish or will
cause its counsel to furnish such instructions and advice, and, for any action
taken in accordance with such instructions or advice, or in case such
instructions and advice shall not be promptly furnished as required by this
resolution, this Corporation will indemnify and hold harmless said Transfer
Agent from any and all liability, including attorneys fees and court costs. The
Transfers Agent may, at its discretion, but shall have no duty to prosecute or
defend any action or suit arising out of authorizations hereby granted unless
this Corporation shall, when requested, furnish it with funds or the equivalent
to defray the costs of such prosecution or defense.
XI. That the said Transfer Agent may deliver from time to time at its
discretion, to this Corporation, for safe-keeping or disposition by this
Corporation in accordance with law, such records accumulated in the performance
of its duties as it may deem expedient, and this Corporation assumes all
responsibility for any failure thereafter to produce any paper, record or
document so returned if, and when, required.
XII. That this Corporation shall indemnify and hold harmless said
Transfer Agent from any and all liability, including attorneys fees and court
costs, for any action taken by the Transfer Agent in connection with its
appointment and conduct as Transfer Agent, except for said agent's own wilful
misconduct or gross negligence, and shall, at the request of said Transfer
Agent, defend any action brought against the agent hereunder.
XIII. That the Transfer Agent authorized to forward certificates of Stock,
Scrip and Warrants of this Corporation issued on transfer or otherwise by first
class mail under a blanket bond of indemnity covering the non-receipt of such
Stock, Scrip and Warrants by any of the stockholders of this Corporation, in
which bond this Corporation and the Transfer Agent are directly or indirectly
named as obligees;
That in the event of non-receipt by any stockholder of this Corporation of
certificates of Stock, Scrip and Warrants so mailed, the said Transfer Agent is
authorized to issue new certificates of said Stock, Scrip and Warrants for a
like amount in place thereof, upon receipt from the stockholders of an affidavit
and proof of loss provided for under said blanket bond and the issuance by the
Surety Company of an assumption of the loss under said blanket bond, all without
further action or approval of the Board of Directors or the officers of this
Corporation
XIV. That the proper officers of this Corporation be and they hereby are
authorized and directed to deliver to the Transfer Agent a sufficient supply of
blank stock certificates and to renew such supply from time to time upon request
of the Transfer Agent and to pay the Transfer Agent prevailing fees and
reimburse it for disbursements incurred by it when and as the same are billed to
this Corporation which, to the extent such fees and disbursements remain unpaid,
hereby grants to the Transfer Agent a lien on the books, records and other
property of this Corporation in the custody or possession of the Transfer Agent.
XV. That the Transfer Agent is hereby authorized without any further
action on the part of this Corporation to appoint as successor Transfer Agent
any corporation or company which may succeed to the business of the Transfer
Agent by merger, consolidation or otherwise (such corporation or company being
hereinafter called the "Successor"); the Successor to have the same authority
and appointment contained in this resolution as if this Corporation itself had
appointed it Transfer Agent. The Successor shall, when appointed, be the Agent
of this Corporation and not an Agent of Continental Stock Transfer & Trust
Company.
XVI. That the Secretary or Assistant Secretary be and hereby are
instructed to certify a copy of these resolutions under the seal of this
Corporation and to lodge the same with Continental Stock Transfer & Trust
Company, together with such certified documents, opinions of counsel,
certificates, specimen signatures of officers and information as Continental
Stock Transfer & Trust Company may require in connection with its duties as
Transfer Agent and immediately upon any change therein which might affect
Continental Stock Transfer & Trust Company in its duties to give the Transfer
Agent written notice thereof and to furnish such additional certified documents,
certificates, specimen signatures of officers and information as Continental
Stock Transfer & Trust Company may require, it being understood and agreed that
Continental Stock Transfer & Trust Company shall be fully protected and held
harmless for the failure of this Corporation to give proper and sufficient
notice of any such change.
XVII. That this document, when executed by the Corporation, shall
constitute the full agreement between it and Continental Stock Transfer & Trust
Company and shall not be amended or modified except in writing signed by both
parties.
XVIII. This agreement shall be interpreted under the laws of the State of
New York.
2
<PAGE>
Certificate of Secretary
I, J. Eric Van Atta , Secretary of American Artists Film Corporation
----------------------- ---------------------------------
a corporation duly organized and existing under the laws of the State of
Missouri DO HEREBY CERTIFY:
- -----------------
A. That the foregoing is a true copy of a certain Resolution duly adopted,
in accordance with the By-Laws, by the Board of Directors of the said
Corporation, at, and recorded in the minutes of a meeting of the said Board duly
held on November 6, 1996, XXXXXX and of the whole of the said Resolution, and
----------------
that the said Resolution has not been rescinded or modified.
B. That, accompanying this Certificate are:
(1) A copy of the Charter or Certificate of Incorporation of the said
Corporation, with all amendments to date, duly certified under official seal by
the state officer having custody of the original thereof;
(2) A true and complete copy of the By-Laws of the said Corporation, as
at present in force;
(3) A signature card bearing the names and specimen signatures of all
the officers of the said Corporation;
(4) Specimens of certificates of each denomination and class of stock of
the said Corporation in the form adopted by the said Corporation; and
(5) An opinion by counsel for the Corporation covering validity of the
outstanding shares referred to in the above-mentioned Resolution and their
registration or exemption from registration under the Securities Act of 1933 as
amended.
C. That the total authorized stock of the said Corporation is: 50,000,000
----------
Shares, divided into 20,000,000 Shares of Class A Common Stock of $0.001 Par
---------- -------------- ------
Value each; 20,000,000 Shares of Class B Common Stock of $0.001 Par Value each;
---------- -------------- ------
10,000,000 Shares of Preferred Stock of $0.001 Par Value each;
- ---------- --------- ------
That of the said authorized stock, there are now issued:
712,620 Shares of the said Class A Common Stock 5,502,277 Shares of the
------- -------------- ---------
said Class B Common Stock 0 Shares of the said Preferred Stock, that such issue
-------------- - ---------
has been duly authorized, and that all of the said shares are fully paid.
D. That the following data are true and correct with respect to the said
Corporation.
<TABLE>
<CAPTION>
<S> <C>
Names of Officers Addressess
----------------- ----------
C.E.O. Steven D. Brown 1245 Fowler St., N.W., Atlanta, GA 30318
-------------------------------------------------------------------------------------
Co-President Rex Hauck '' '' ''
--------------------------------------------------------------------------------
Co-President Vivian W. Jones '' '' ''
--------------------------------------------------------------------------------
Secretary & Vice President- J. Eric Van Atta '' '' ''
_________________________________________________________________________________
Treasurer Robert A. Martinez '' '' ''
__________________________________________________________________________________
_____________________________________________________________________________________________
_____________________________________________________________________________________________
_____________________________________________________________________________________________
</TABLE>
Counsel Carl I. Gable, P.C.. Troutman Sanders LLP
-----------------------------------------------------------------------
Address Nationsbank Plaza, 600 Peachtree St., N.E. Suite 5200 Atlanta, GA
--------------------------------------------------------------------
30308-2216
--------------------------------------------------------------------
Address of the Corporation 1245 Fowler St., N.W., Atlanta, GA 30318
-----------------------------------------------------
IN WITNESS WHEREOF, I have hereunto set my hand, and affixed the seal of
the said Corporation, this 6th day of November, 1996.
--- -------- --
By/s/ J. Eric Van Atta
-------------------------------
Secretary
(CORPORATE SEAL)
Agreed to and accepted: Continential Stock Transfer & Trust Company
(CORPORATE SEAL) By /s/ Roger Burnhammer
----------------------------------------
Roger Burnhammer
3
<PAGE>
DEPOSIT GUARANTY NATIONAL BANK
JACKSON, MISSISSIPPI
PROMISSORY NOTE
----------------------------------
Borrower Number Note Number
----------------------------------
1156611 0535401
----------------------------------
American Artists Film Corporation
- -----------------------------------------
- -----------------------------------------
Borrower Name(s)
Amount of Note Loan Type
1245 Fowler Street N.W.
- --------------------------------- $69,183.95 223
Address ------------------ -------------
Atlanta, GA
- --------------------------------- Date of Note Date Due Term Days
City State
May 20, 1997 Nov. 17, 1997 181
30318 ------------- ------------- ---------
- ---------------------
Zip Code
181 days after date, the undersigned (jointly and severally,
--------------------
if more than one) hereinafter called Maker, promises to pay to DEPOSIT GUARANTY
NATIONAL BANK, Jackson, Mississippi, or order, payable at Main Office or any
Branch Sixty Nine Thousand One Hundred Eighty Three and 95/100 Dollars
- -----------------------------------------------------------------------
with interest thereon from date until paid at the per annum rate of: 8.75%
-------
This note is payable in monthly instalments of $3000.00 INCLUDING INTEREST
beginning June 20, 1997 and on the 20th day of each succeeding month with the
remaining unpaid principal plus accrued interest due and payable at maturity.
Failure to pay any instalment as and when due shall, at the option of the
holder, mature the entire indebtedness.
In the event any installment payment of principal and/or interest is more than
fifteen (15) days past due, Maker promises to pay a late payment charge of $5.00
or four (4%) percent of the amount of the delinquency, whichever is greater. On
loans of $100,000.00 or less having stated maturity of five years or less, the
late payment charge shall not exceed $50.00.
At its option, and at one or more times, Bank may, but shall have no obligation
to, debit any deposit account of any Obligor with Bank for all or any part of
any sums then due and payable to Bank hereunder.
Maker has Pledged to Bank as collateral for payment of this and any and
all other liabilities, direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising (all hereinafter called
"obligation"), the following property listed below, hereinafter called
Collateral:
UNSECURED
Page 1 of 3 Pages
<PAGE>
Any pledge or transferee of this note and the Collateral shall have all
rights of Bank hereunder and Bank shall thereafter be relieved from any
liability with respect to any Collateral so pledged or delivered.
Maker will at all times keep the collateral insured at all times against
all insurable hazards in amounts equal to the full cash value of the collateral.
Such insurance shall be with insurance carriers which are qualified to do
business in Mississippi and in good standing with the Mississippi Department of
Insurance, and shall provide for payment of all losses thereunder to Bank as its
interest may appear, and, if required, Maker will deposit the policies of
insurance with Bank. Any money received by Bank under said policies may be
applied to the payment of the indebtedness secured hereby with such payment
supplied first to interest, then to principal and any other charges, whether or
not due and payable, or at Bank's option, may be delivered by Bank to Maker for
the purpose of repairing or restoring the collateral. Maker hereby assigns to
Bank all rights to receive proceeds of insurance not exceeding the amount of
Maker's indebtedness to bank, direct any insurer to pay all proceeds directly to
Bank, and appoints Bank as its attorney-in-fact to endorse any draft or check
made payable to Maker in order to collect the benefit of any such insurance.
Prior to the expiration or cancellation date of Maker's insurance policy on the
collateral, Maker shall provide Bank with a renewal or replacement policy having
an effective date the same as the expiration or cancellation date on Maker's
prior policy and meeting the same requirements as stated hereinabove.
If Maker fails to keep the collateral insured as required by Bank, such
failure shall be a default under the terms and conditions of this note. In
addition, Bank may, at its option, and in addition to any other rights and
remedies the Bank may have under this note or any other agreement with Maker,
purchase insurance at Maker's expense to protect Bank's interest continuously
retroactive to the date of expiration or cancellation of Maker's policy for
Maker's failure to keep the collateral insured. If Bank chooses to purchase
insurance upon Maker's failure to keep the collateral insured, Bank will notify
Maker about the types and amounts of the coverages at the time Bank purchases
such insurance. In addition,the insurance that the Bank purchases likely will
not provide all of the insurance coverage which Maker might normally obtain on
its own, such as liability coverage or coverage for any equity which Maker may
have in the collateral. Also, the deductibles may not be the same as the
deductibles contained in a policy which Maker might normally obtain on its own.
The insurance the Bank purchases likely will not be purchased through
the same carrier and/or agent from which Maker might have previously purchased
insurance on the collateral, and in most cases, the cost of the insurance will
be significantly higher than the insurance which Maker might obtain on its own.
If Bank pays for insurance, such payment shall be secured by the collateral, and
shall hear interest at the ANNUAL PERCENTAGE RATE set forth in Maker's Note
and/or Loan Agreement. Maker agrees to reimburse Bank on demand for any such
payment, plus accrual interest, or otherwise to pay said sums in any manner of
installments required by Bank. Maker authorizes Bank to forward any information
which Bank deems necessary to third parties performing services incidental to
Bank's rights and duties under this Note and any Security Agreement with Maker,
including but not limited to, insurance monitoring and placement services.
Even if Bank purchases insurance on the collateral as set out
hereinabove, Maker has the right to purchase the required insurance from an
agent or company of Maker's choice at any time and provide the insurance policy
to Bank. Upon receipt of such policy, Bank will have the insurance cancelled for
any period during which Maker has the required insurance in force and any refund
will be made to Maker's account.
Maker shall take all necessary steps to preserve rights against prior
parties in instruments or chattel paper constituting Collateral and shall be
responsible generally for its preservation. If the Collateral shall at any time
become unsatisfactory to Bank, Maker shall within twenty-four hours after
demand, pledge as part of the Collateral additional property which is
satisfactory to bank.
Upon the happening of any of the following events, each of which shall
constitute a default hereunder, all liabilities of each Maker to Bank shall
become immediately due and payable at the option of Bank: (1) failure of any
Obligor (which shall include each maker, endorser, surety and guarantor of this
note) to perform any agreement hereunder or pay any obligation secured hereby
when due, including without limitation, failure to obtain or maintain any
required insurance on the collateral pledged to secure this note; (2) death of
any Obligor; (3) filing of any petition in bankruptcy by or against any Obligor;
(4) application for appointment of a receiver for, making of a general
assignment for the benefit of creditors by, or solvency of any Obligor; or
(5) determination by any officer of Bank that a material adverse change has
occurred in the financial condition of any Obligor. Upon occurrence of any such
event or at any time thereafter, Bank shall have the remedies of a secured party
under Uniform Commercial Code of Mississippi. Any notice of sale or other
intended disposition of the Collateral sent to Maker at least five days prior to
such action shall constitute reasonable notice to Maker. Bank may waive any
default before or after the same has been declared without impairing its rights
to declare a subsequent default hereunder, this right being a continuing one.
In addition, if Maker is in default under this Note, and Maker has
purchased credit life insurance and/or credit disability insurance in connection
with this Note, then Bank may, at its option, and notwithstanding the terms of
the policy(ies) and/or certificate(s) governing such insurance, cancel such
insurance and credit any unearned premium(s) to your outstanding balance under
the Note.
Any renewals, extensions and/or modifications of this Note may not
extend the expiration date of the credit life insurance and/or the credit
disability insurance written in connection with this Note. You should refer to
your credit life/credit disability policy and/or certificate to determine the
expiration date of such insurance.
This note, or any renewal thereof, may be extended without notice and
without affecting the liability of any Obligor or any Collateral. The Bank may
at its discretion surrender any Collateral without affecting the liability of
any Obligor.
Bank is hereby given a lien upon and a security interest in any moneys
or property, including any deposits, at any time in possession of Bank belonging
to each Obligor, all of which shall be treated as security for payment of this
note. Bank may, at its option in event of default, set off such moneys, property
or deposits against this note or any other obligation of Maker.
Page 2 of 3 Pages
<PAGE>
All Obligors waive protest of this note. If this note is not paid when due,
all Obligors agree to pay all costs and expenses of collection, including
reasonable attorney's fees and legal expenses, all of which are secured by the
Collateral. Bank shall in no event be liable to any party hereto for failure to
collect this note, in whole or in part.
Any demand upon or notice to Maker shall be sufficiently served for all
purposes if personally delivered or placed in the mail addressed to the address
shown below or such other address as may be shown on the Bank's records.
In the event that interest on this note is less than $10.00, Maker agrees to
pay a charge of $10.00 in lieu of interest.
- ------------------------------------------------------------------------------
NOTICE TO COSIGNER
(1) You are being asked to guarantee this debt. Think carefully before you do.
If the maker (borrower) does not pay the debt, you will have to. Be sure you
can afford to pay if you have to, and that you want to accept this
responsibility.
(2) You may have to pay up to the full amount of the debt if the maker
(borrower) does not pay. You may also have to pay late fees or collection
costs, which increase this amount.
(3) The Bank can collect this debt from you without first trying to collect
from the maker (borrower). The Bank can use the collection methods against you
that can be used against the maker (borrower), such as suing you, garnishing
your wages, etc. If this debt is ever in default, that fact may become a part
of your credit record.
(4) This notice is not the contract that makes you liable for the debt.
- -------------------------------------------------------------------------------
American Artists Film Corporation
Primary SSN Endorser or Co-Signer No. By: /s/ Glen C. Warren
----------------------------------
581950450 Glen C. Warren, M.D., Board Member
By: /s/ Steven D. Brown
--------------------------------
Steven D. Brown, President
By: /s/ J. Eric Van Atta
--------------------------------
J. Eric Van Atta, Vice Pres.
--------------------------------
--------------------------------
--------------------------------
--------------------------------
Page 3 of 3 Pages
<PAGE>
SETTLEMENT AGREEMENT AND RELEASE
--------------------------------
This Settlement Agreement and Release (Agreement) is made, entered into,
and effective as of the 29th day of May, 1997 by and among Greystone
Communications, Inc., a California corporation ("Greystone"), on the one hand,
and American Artists Film Corporation, a Missouri corporation (American
Artists), on the other hand. Greystone and American Artists are sometimes
collectively referred to herein as the Settling Parties.
RECITALS
--------
A. On or about May 20, 1994 Greystone and American Artists entered into a
joint venture agreement ("Joint Venture Agreement".)
B. Pursuant to the Joint Venture Agreement, Greystone and American
Artists co-produced two, two-hour television and home video programs. The first
was entitled "Angels: The Mysterious Messengers" ("Angels I") and the second
was entitled "Angels II: Beyond The Light" ("Angels II"). (Angels I and Angels
II shall be collectively referred to as the "Angels Programs".)
C. Both of the Angels Programs were licensed for initial network
television exhibition by the National Broadcasting Company ("NBC"). The 1-800
direct sales of the home videos of both Angels Programs were contracted to
Calling Card, Inc. ("CCI"); the foreign distribution of both Angels Programs
was contracted to Alfred Haber Distribution, Inc. ("Haber"); and the
distribution of the home videos of Angels I (excluding 1-800 direct sales) was
contracted to Time-Life Video ("Time-Life").
<PAGE>
Additionally, a companion book to Angels I ("Book") was published by Ballantine
Books ("Ballantine").
D. Subsequent to the production of both Angels Programs and the
publishing of the Book, certain disputes arose between the Settling Parties
relating to, among other things, the amount of proceeds owed each of the
Settling Parties from the exploitation of the Angels Programs by CCI, Haber and
Time-Life, and of the Book by Ballantine. Among other things, American Artists
contended that the book was not subject to the Joint Venture Agreement, and
Greystone contended that American Artists withheld in excess of $140,000 of
monies appropriately belonging to Greystone.
E. As a result of these disputes, on or about May 1, 1995 Greystone
served a Demand for Arbitration with the American Arbitration Association
asserting claims for Breach of Contract, Breach of Fiduciary Duty, Fraud and
Accounting against American Artists. On or about May 26, 1995, American Artist
served a Counter Demand for Arbitration asserting counterclaims for Breach of
Contract, Breach of the Implied Covenant of Good Faith and Fair Dealing, Breach
of Fiduciary Duty, Accounting, and Declaratory Relief against Greystone. The
Demand for Arbitration and Counter Demand for Arbitration was assigned Case
No. 72 140 00455 95 and shall be referred to as the "Arbitration." Both American
Artists and Greystone have denied the claims of the other and asserted defenses
thereto.
F. It is the mutual intent of the Settling Parties to this Agreement to
resolve all their known differences and settle all
-2-
<PAGE>
their known disputes in the manner and on the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the terms and conditions of this
Agreement, and for good and valuable consideration, the Settling Parties agree
and release each other as follows:
AGREEMENT AND RELEASES
----------------------
1. The Settling Parties incorporate by this reference all the above
recitals as part of their Agreement, as if set forth in full.
2. (a) Commencing June 1, 1997 American Artists shall pay Greystone the
total amount of One Hundred Forty Thousand Dollars ($140,000) ("Settlement
Amount") payable over fourteen (14) months at the rate of Ten Thousand Dollars
($10,000) per month as follows:
Date Payment
---- -------
June 1, 1997 $10,000.00
July 1, 1997 $10,000.00
August 1, 1997 $10,000.00
September 1, 1997 $10,000.00
October 1, 1997 $10,000.00
November 1, 1997 $10,000.00
December 1, 1997 $10,000.00
January 1, 1998 $10,000.00
February 1, 1998 $10,000.00
March 1, 1998 $10,000.00
April 1, 1998 $10,000.00
May 1, 1998 $10,000.00
-3-
<PAGE>
June 1, 1998 $10,000.00
July 1, 1998 $10,000.00
(b) There is no pre-payment penalty should American Artists pay the
$140,000 faster than at the rate of $10,000 per month. American Artists shall
have the right to designate the allocation of any such early payment against any
future payment or payments it chooses. In the event that any monthly payment is
not received by Greystone by the fifteenth (15th) day of the month, American
Artists shall be in default of this Agreement and Greystone shall be entitled to
immediately have the stipulated arbitration award confirmed and entered as a
judgment by the Los Angeles and Atlanta Superior Courts, all as provided in
paragraph 3 below.
3. The Settlement Amount shall be secured by a stipulated arbitration
award ("Award") in the amount of One Hundred Ninety Thousand Dollars ($190,000)
in the form attached as Exhibit A hereto, as well as a stipulation for
confirmation and entry of judgment ("Stipulation") in the form attached as
Exhibit B hereto. The Award shall be signed by the arbitrator but not confirmed
and entered until such time, if ever, that American Artists defaults in its
payment of any portion of the Settlement Amount or any other payment required
pursuant to paragraph 4 below. Should American Artists default, Greystone shall
be entitled to immediately appear ex parte to have the Award confirmed and
--------
entered as a judgment against American Artists by the Los Angeles and Atlanta
Superior Courts subject only to the right of American Artists to bring to the
Court's attention in such ex parte proceeding(s) what it contends is the proper
--------
amount
-4-
<PAGE>
of the award and judgment if there is any dispute with respect to such amount.
The amount of the Award shall be reduced automatically on a dollar for dollar
basis for each payment made for all fourteen (14) months of the payment period.
By way of example, if prior to default eight (8) of the $10,000 payments have
been made, the amount of the Award shall be reduced automatically by $80,000 to
a total of $110,000, and judgment shall be entered in the amount of $110,000,
not $190,000. However, once the amount of the Award is reduced to Fifty Thousand
Dollars ($50,000) it shall be reduced no further until such time as the
Settlement Amount and all other payments required pursuant to paragraph 4 below,
if any, have been made. Greystone's right to have the Award confirmed and
entered as a Judgment shall be completely canceled, and American Artists'
obligations relating to the Award completely discharged, and Greystone shall not
seek and covenants not to seek to have the Award confirmed and entered as a
judgment thereon in any superior court once all fourteen (14) $10,000 payments
have been made to Greystone. The sole exception to the immediately preceding
sentence shall be in the event that the Award has been increased by unpaid
amounts pursuant to paragraph 4 below which remain unpaid at the time the
fourteenth payment is made. However, there shall be no residue of the Award
based solely upon any paragraph 4 default(s) which occurs after the making of
the fourteenth payment. In such event, Greystone shall be entitled to exercise
all other remedies available under the law as to such Paragraph 4 default(s).
-5-
<PAGE>
4. Effective immediately upon execution of this Agreement, Greystone
shall be entitled to fifty percent (50%) of any and all additional gross
revenues received by or credited to American Artists ("Gross Revenues")
pertaining to the Angels Programs, including but not limited to, Gross Revenues
from: (a) CCI; (b) Haber; (c) Time-Life; (d) Ballantine; (e) Turner Original
Productions; and/or (f) any and all other sources of Gross Revenues whether
presently existing or regarding which the Settling Parties agree in the future.
This includes all Gross Revenues received by American Artists from any of the
above sources at any time on or after January 1, 1997. Whenever additional Gross
Revenues (or an accounting statement without any Gross Revenues) are received by
American Artists from any of the sources listed in items (a) through (e) above,
American Artists shall, the same day that the Gross Revenues are received, fax a
copy of the payment, as well as any accompanying accounting statement, to
Greystone. American Artists shall then have ten (10) days to mail payment of
Greystone's 50% share to Greystone. In the event that any such payment is not
received by Greystone within twenty (20) days of the date that such payment was
received by American Artists, the amount owed shall be increased by ten percent
(10%) and the total unpaid amount shall be added to the Award. The same
procedure shall also apply to Greystone in the event that it receives any Gross
Revenues from a source other than American Artists pertaining to the Angels
Programs at any time after January 1, 1997. Any new agreements with licensing
entities pertaining to the exploitation of the Angels Programs (or any sequels)
shall be mutually agreed to and
-6-
<PAGE>
approved by the Settling Parties and shall provide that Greystone and American
Artists shall each be paid their respective 50% interests in proceeds directly
by the licensing entity.
5. (a) Greystone shall be responsible for paying the full amount of the
Screen Actors Guild ("SAG") residuals obligations as calculated by Cast & Crew,
a copy of which is attached hereto as Exhibit C, at such time as payment is
required in writing by SAG.
(b) Greystone and American Artists shall each be required to pay
fifty percent (50%) of the principal amount only of all other SAG and all
Directors Guild of America ("DGA") residuals obligations that have accrued or
may accrue but have not been paid at the time of execution of this Agreement, on
both Angels Programs, if any, at such time as payment is requested in writing by
SAG and/or the DGA as applicable, except that American Artists shall not be
required to pay any penalties, fines, damages, contributions, interest or other
amounts of any nature (collectively "Other Amounts") on, in addition to, or in
connection with those principal amounts should any Other Amounts become due or
claimed by SAG, the DGA, or its fund administrators or auditors. Greystone shall
be solely and exclusively responsible for reporting to the DGA and SAG.
Greystone shall further be solely and exclusively responsible for payment of any
residuals, contributions, claims or other obligations to the Writers Guild of
America ("WGA") in connection with the Angels Programs.
-7-
<PAGE>
(c) Greystone hereby agrees to indemnify and hold harmless American
Artists from any and all claims, losses, causes of action, grievances,
complaints, arbitrations, attorneys' fees, costs of defense, expenses or other
detriment of whatever nature (including but not limited to the Other Amounts
referred to in paragraph 5(b) above) incurred by, or alleged or sought against,
American Artists in any threatened or actual proceeding by or involving any
Guild, except as otherwise provided in this Agreement with respect to the
principal amount of any SAG or DGA residuals.
6. Effective upon execution of this Agreement, the Releasing Parties (as
defined in paragraph 8 below) shall not initiate contact with any Guild,
including but not limited to the DGA and/or the WGA, for the purpose of
specifically discussing (a) either or both of the Angels Programs or (b) the
other Settling Party. However, nothing shall preclude any party from truthfully
responding to a written or oral inquiry from a Guild which is limited to items
(a) and/or (b) above, so long as the party responding to the inquiry promptly
provides the other party with a copy of the Guild's written inquiry and the
response. If any Guild orally inquires, the affected Settling Party shall
request the Guild to put its inquiry in writing; if the Guild refuses to do so,
the Settling Party, if it chooses to respond, shall respond in writing to the
Guild's oral inquiry. In the event that the Guild demands an oral response, the
Settling Party, if it chooses to respond, may respond to the Guild orally; but
shall immediately thereafter put both the oral inquiry and the oral response in
writing and provide it to the other Settling
-8-
<PAGE>
Party. Nothing herein shall require any of the Releasing Parties to take or not
take any action in violation of any collective bargaining agreement (or
policies, manuals or rules promulgated thereunder) to which that Releasing Party
is a signatory, or with which it, he or she wishes to comply.
7. It is expressly understood and agreed that except as may be provided
in this Agreement, the Provisions of the Joint Venture Agreement remain in full
force and effect.
8. Except for the obligations specifically undertaken in this Agreement,
Greystone and American Artists, for themselves and for each of their respective
agents, employees, representatives, partners, parents, subsidiaries, affiliates,
predecessors, successors, assigns, stockholders, officers, directors,
accountants, and attorneys, and each of them (the Releasing Parties), hereby
fully release and discharge each other, and each of their respective agents,
employees, representatives, partners, parents, stockholders, subsidiaries,
affiliates, predecessors, successors, assigns, officers, directors, accountants,
and attorneys, and each of them (the Released Parties), of and from any and all
claims, debts, demands, contracts, liabilities, damages, penalties and punitive
damages, obligations, actions, costs (including costs of suit, attorneys' fees
and expenses), and causes of action of any and every kind, nature, character,
type or description, fixed or contingent ("Claims"), which the Releasing Parties
ever had, now have or may claim to have, or may hereafter have or claim to have
against the Released Parties by reason of any act,
-9-
<PAGE>
omission, occurrence or condition occurring or existing on or before the date of
this Agreement, including but not limited to the filing, prosecution, defense,
and settlement of the Arbitration.
9. The Settling Parties hereby acknowledge and represent to each other
that they have not assigned to any person or entity any right or obligation
which would preclude or prevent the Settling Parties from performing all of
their respective duties and obligations under the terms and conditions of this
Agreement.
10. The Settling Parties hereby acknowledge, understand and agree that the
settlement and releases memorialized in this Agreement are compromises of
disputed claims, and that the payment or acceptance of any monies, and the
giving or receiving of any other consideration, by one of them to any other is
not an admission of liability on the part of any of them, and is not to be
construed as such. By this Agreement, liability of any of the parties is
expressly denied by all Settling Parties to this Agreement.
11. All notices required or permitted to be sent under this Agreement
shall be in writing by registered or certified mail, return receipt requested,
and by telefax. Notice to Greystone shall be sent to Shinaan S. Krakowsky, 4705
Laurel Canyon Boulevard, 5th Floor, Valley Village, California 91607. Notice to
American Artists shall be sent to Joseph R. Taylor, Stein & Kahan, 1299 Ocean
Avenue, Santa Monica, California 90401; and J. Eric Van Atta, 1245 Fowler Street
NW, Atlanta, Georgia 30318.
12. The Settling Parties acknowledge and represent to each other that they
have freely and voluntarily entered into this
-10-
<PAGE>
Agreement in reliance upon their own independent investigation and analysis of
the facts underlying the subject matter of the Arbitration and this Agreement,
including but not limited to the releases given in this Agreement, and that no
warranties, representations or promises of any kind or nature have been made,
directly or indirectly, to induce each of them to enter into this Agreement,
other than those set forth in this Agreement and any side letter thereto.
13. The Settling Parties represent and warrant that each individual
signing this Agreement on behalf of an entity has the right, power, legal
capacity, and authority to do so, and that no further approval or consent of any
person, board of directors, or other entity is necessary.
14. This Agreement shall, in all respects, be interpreted, enforced and
governed under and pursuant to the laws of the State of California, without
regard to the laws pertaining to conflicts or choice of law principles.
15. The Settling Parties each acknowledge and agree that this Agreement
was jointly prepared by each of them, and any uncertainty or ambiguity existing
in this Agreement shall not be interpreted against any other party, if any
uncertainty or ambiguity is found to exist.
16. Should any provision of this Agreement be subsequently held to be
illegal, invalid, unenforceable under any present or future laws effective
during the terms of this Agreement, such provisions shall be fully severable and
the remaining provisions of this Agreement shall be fully valid and enforceable;
and in lieu thereof, there shall be added a provision as similar in
-11-
<PAGE>
terms to such illegal, invalid or unenforceable provision as may be possible and
legal, valid and enforceable.
17. This Agreement may be executed in any number of counterparts and each
such counterpart shall be deemed to be an original instrument.
18. Any disputes relating to, connected with or arising from the
interpretation or enforcement of this Agreement shall be resolved by expedited
arbitration before the American Arbitration Association office located in Los
Angeles, California; and the Settling Parties hereby consent to the jurisdiction
and venue of that body for that purpose.
GREYSTONE COMMUNICATIONS, INC. AMERICAN ARTISTS FILM CORPORATION
By /s/ Shinaan S. Krakowksy By /s/ J. Eric Van Atta
------------------------------- -----------------------------
Authorized Officer Authorized Officer
-12-
<PAGE>
EXHIBIT A
<PAGE>
SHINAAN S. KRAKOWSKY
4705 Laurel Canyon Blvd., 5th Floor
Valley Village, California 916073
(818) 762-2900
Attorneys for Claimant and Counter-Respondent
GREYSTONE COMMUNICATIONS, INC.
JOSEPH R. TAYLOR
STEIN & KAHAN, A Law Corporation
1299 Ocean Avenue, 4th Floor
Santa Monica, California 90401
(310) 458-6900
Attorneys for Respondent and Counter-Claimant
AMERICAN ARTISTS FILM CORPORATION
AMERICAN ARBITRATION ASSOCIATION
LOS ANGELES
IN THE MATTER OF ARBITRATION ) Case No. 72 140 01455 95
BETWEEN )
) STIPULATION AND
GREYSTONE COMMUNICATIONS, INC., a ) AWARD OF ARBITRATOR
California corporation, )
)
Claimant and Counter-Respondent, )
)
- and - )
)
AMERICAN ARTISTS FILM )
CORPORATION, a Georgia corporation, )
)
Respondent and Counter-Claimant.)
_____________________________________ )
STIPULATION
-----------
IT IS HEREBY STIPULATED AND AGREED by and between Claimant and Counter-
Respondent Greystone Communications, Inc. (Greystone) and Respondent and
Counter-Claimant American Artists Film Corporation (American Artists), through
their respective undersigned counsel of record, that:
<PAGE>
(1) Greystone shall be and hereby is granted an award in its favor and
against American Artists in the total amount of $190,000.00, which amount shall
be reducible on a dollar for dollar basis down to zero dollars, as follows: Each
time American Artists timely pays Greystone its $10,000.00 monthly installment
which installments commence June 1, 1997 and end July 1, 1998, the amount of the
award shall be reduced by each such $10,000.00 monthly payment up to and
including a total reduction of $140,000.00, at which time this award shall be
fully discharged subject to paragraph 2. In no circumstances shall the award
ever be reduced to zero dollars unless and until American Artists pays the
entire $140,000.00 amount to Greystone.
(2) Greystone shall be entitled to fifty percent (50%) of any and all
additional gross revenues received by or credited to American Artists ("Gross
Revenues") pertaining to the two programs known as Angels: The Mysterious
Messengers and Angels II: Beyond the Light (hereafter, Angels Programs),
including but not limited to, Gross Revenues from: (a) Calling Card Inc.; (b)
Alfred Haber Distribution. Inc.; (c) Time-Life Video; (d) Ballantine Books; (e)
Turner Original Productions; and/or (f) any and all other sources of Gross
Revenues, whether presently existing or regarding which Greystone and American
Artists agree in the future. This includes all Gross Revenues received by
American Artists from any of the above sources at any time on or after January
1, 1997. Whenever additional Gross Revenues (or accounting statements without
any Gross Revenues) are received by American Artists from any of the sources
listed in items (a) through (e) above, American Artists shall, the same day that
the Gross Revenues are received, fax a copy of the payment and/or any accounting
statement, to Greystone. American Artists shall then have ten (10) days to mail
payment of Greystone's 50% share to Greystone. In the event that any such
payment is not received by Greystone within twenty (20) days of the date that
American Artists received such payment, the amount owed shall be increased by
ten percent (10%) and the total unpaid amount shall be added to this Award.
(3) This Stipulation and Award is subject to the provisions of paragraphs
3 and 4 of the agreement between Greystone and American Artists dated May 29,
1997.
2
<PAGE>
(4) Each party shall bear its own attorneys' fees and costs.
SHINAAN S. KRAKOWSKY
DATED: 5/29/97
--------------
By /s/ Shinaan S. Krakowsky
--------------------------------------------
Shinaan S. Krakowsky
Attorneys for Claimant and Counter-Respondent
GREYSTONE COMMUNICATIONS, INC.
STEIN & KAHAN, A Law Corporation
DATED: 6-23-97
--------------
By /s/ Joseph R. Taylor
--------------------------------------------
Joseph R. Taylor
Attorneys for Respondent and Counter-Claimant
AMERICAN ARTISTS FILM CORPORATION
AWARD
-----
Based upon the foregoing stipulation of the parties, and good cause
appearing, Greystone Communications, Inc. shall be and hereby is AWARDED and
shall RECOVER from American Artists Film Corporation the sum of $190,000.00, or
such other amount as is demonstrated to the court(s) confirming this arbitration
award and/or entering judgment, by the declarations under penalty of perjury of
Greystone and American Artists in accordance with the foregoing stipulation of
the two parties. Each party is to bear its own attorneys' fees and costs.
IT IS SO ORDERED:
/s/ Jerome J. Sussman
DATED: 6/30/97 -------------------------------------------
ARBITRATOR AMERICAN ARBITRATION ASSOCIATION
3
<PAGE>
EXHIBIT B
<PAGE>
SHINAAN S. KRAKOWSKY
4705 Laurel Canyon Blvd., 5th Floor
Valley Village, California 916073
(818) 762-2900
Attorneys for Plaintiff
GREYSTONE COMMUNICATIONS, INC.
JOSEPH R. TAYLOR
STEIN & KAHAN, A Law Corporation
1299 Ocean Avenue, 4th Floor
Santa Monica, California 90401
(310) 458-6900
Attorneys for Defendant
AMERICAN ARTISTS FILM CORPORATION
SUPERIOR COURT OF THE STATE OF CALIFORNIA
IN THE COUNTY OF LOS ANGELES
GREYSTONE COMMUNICATIONS, INC., a ) Case No.
California corporation, )
) STIPULATION FOR CONFIRMATION OF
Plaintiffs, ) ARBITRATION AWARD AND ENTRY OF
) JUDGEMENT
vs. )
)
AMERICAN ARTISTS FILM )
CORPORATION, a Georgia corporation,)
)
Defendants, )
___________________________________)
IT IS HEREBY STIPULATED AND AGREED by and between Greystone Communications,
Inc. (Greystone) and American Artists Film Corporation (American Artists),
through their respective undersigned counsel of record, that the award of the
American Arbitration Association Arbitrator, a true and correct copy of which is
attached hereto and incorporated herein as Exhibit A, in favor of Greystone and
against American Artists shall be CONFIRMED and ENTERED as a JUDGEMENT against
American Artists and in favor of Greystone, and that Greystone and American
Artists WAIVE any and all objections to the
<PAGE>
confirmation of the arbitration award as the judgement of this Court. Each party
shall bear its own attorneys' fees and costs.
DATED: 5/29/97 SHINAAN S. KRAKOWSKY
--------
By: /s/ Shinaan S. Krakowsky
----------------------------------
Shinaan S. Krakowsky
Attorneys for Plaintiff GREYSTONE
COMMUNICATIONS, INC.
DATED: 6-23-97 STEIN & KAHAN, A Law Corporation
--------
By: /s/ Joseph R. Taylor
----------------------------------
Joseph R. Taylor
Attorneys for Defendant
AMERICAN ARTISTS FILM CORPORATION
2
<PAGE>
SHINAAN S. KRAKOWSKY
4705 Laurel Canyon Blvd., 5th Floor
Valley Village, California 916073
(818) 762-2900
Attorneys for Plaintiff
GREYSTONE COMMUNICATIONS, INC.
JOSEPH R. TAYLOR
STEIN & KAHAN, A Law Corporation
1299 Ocean Avenue, 4th Floor
Santa Monica, California 90401
(310) 458-6900
Attorneys for Defendant
AMERICAN ARTISTS FILM CORPORATION
SUPERIOR COURT OF FULTON COUNTY
OF THE STATE OF GEORGIA
GREYSTONE COMMUNICATIONS, INC., a ) Case No.
California corporation, )
) STIPULATION FOR CONFIRMATION OF
Plaintiffs, ) ARBITRATION AWARD AND ENTRY OF
) JUDGEMENT
vs. )
)
AMERICAN ARTISTS FILM )
CORPORATION, a Georgia corporation, )
)
)
Defendants. )
____________________________________)
IT IS HEREBY STIPULATED AND AGREED by and between Greystone Communications,
Inc. (Greystone) and American Artists Film Corporation (American Artists),
through their respective undersigned counsel of record, that the award of the
American Arbitration Association Abritrator, a true and correct copy of which is
attached hereto and incorporated herein as Exhibit A, in favor of Greystone and
against American Artists shall be CONFIRMED and ENTERED as a JUDGEMENT against
American Artists and in favor of Greystone, and that Greystone and American
Artists WAIVE any and all objections to the
<PAGE>
confirmation of the arbitration award as, the judgement of this Court. Each
party shall bear its own attorneys' fees and costs.
DATED: 5/29/97 SHINAAN S. KRAKOWSKY
---------------
By /s/ Shinaan S. Krakowsky
-----------------------------------
Shinaan S. Krakowsky
Attorneys for Plaintiff GREYSTONE
COMMUNICATIONS, INC.
DATED: 6-23-97 STEIN & KAHAN, A Law Corporation
---------------
By /s/ Joseph R. Taylor
-----------------------------------
Joseph R. Taylor
Attorneys for Defendant
AMERICAN ARTISTS FILM CORPORATION
2
<PAGE>
Exhibit C
<PAGE>
CAST & CREW RESIDUAL CAST CONFIRMATION REQUEST
- --------------------------------------------------------------------------------
CLIENT: GREYSTONE COMMUNICATIONS INC DATE: 04/08/97
------------------------------- ----------------------
PRODUCTION: ANGELS2:POWER OF ANGELS EPISODE:______________________
-------------------------------
TYPE: QTR 09/30/96 #1522
------------
================================================================================
CAST & CREW WILL NEED THE FOLLOWING INFORMATION BEFORE WE CAN COMPLETE THE
ABOVE MENTIONED RESIDUALS:
================================================================================
DEAR SHINAAN,,
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HERE IS INVOICE 333455.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IF THERE ARE NO CHANGES, PLEASE SIGN BELOW AND RETURN TO ME.
- --------------------------------------------------------------------------------
FAX (818) 848 - 9484
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WHEN WE RECEIVE THIS FORM AND PAYMENT,CHECKS WILL THEN BE
- --------------------------------------------------------------------------------
PROCESSED.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IF YOU HAVE ANY QUESTIONS, PLEASE CALL ME.
- --------------------------------------------------------------------------------
(818) 848 - 6022
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THANK YOU
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MEL BESHEER
- --------------------------------------------------------------------------------
RESIDUALS
================================================================================
IF THE ENCLOSED WORKSHEET REQUIRES ANY CHANGES PLEASE LIST BELOW:
================================================================================
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
CHANGES REQUESTED BY:__________________________ DATE:__________________
FINAL APPROVAL BY: /s/ Shinaan S. Krakowsky DATE: 4/24/97
--------------------------- ------------------
PROCESS CHECKS?: Yes DATE: 4/24/97
--------------------------- ------------------
<PAGE>
[LETTERHEAD OF CAST & CREW TALENT SERVICES, INC.]
GREYSTONE COMMUNICATIONS, INC. Invoice: 333455
ATTN: SHINAAN KRAKOWSKY
4705 LAUREL CANYON BLVD. Date: 04/04/97
5TH FLOOR Terms: C.O.D.
VALLEY VILLAGE, CA 91607 Contact: mel
Client: 789/4
Payroll charges for RES.SAG QTR 09/30/95 for week ending 04/05/97.
POWER OF ANGELS #1522
<TABLE>
- ------------------------------------------------------------------------------
<S> <C> <C>
ANGELINA, DIANA ACTORS, ACTRE Flat amount 24.19
BROCK, PHILLIP L. ACTORS, ACTRE Flat amount 24.19
BRONSON, KIMBERLI ACTORS, ACTRE Flat amount 48.37
BUCKNER, INA ACTORS, ACTRE Flat amount 24.19
FULLER, WILLIAM ACTORS, ACTRE Flat amount 24.19
HUTTON, PATRICIA B. ACTORS, ACTRE Flat amount 24.19
JOHNSON, BOBBY ACTORS, ACTRE Flat amount 48.37
KOVAL, BARBARA A. ACTORS, ACTRE Flat amount 48.37
LILLY, ROBIN ACTORS, ACTRE Flat amount 72.56
MAC GREEVY, THOMAS ACTORS, ACTRE Flat amount 48.37
MC MAHON, SHAWNA ACTORS, ACTRE Flat amount 48.37
MINOR, ROBERT L. ACTORS, ACTRE Flat amount 48.37
MIRAULT, DON ACTORS, ACTRE Flat amount 24.19
MONROE, STEVE ACTORS, ACTRE Flat amount 24.19
NEALY, FRANCES ACTORS, ACTRE Flat amount 24.19
NELSON, STUART ACTORS, ACTRE Flat amount 24.19
SEAMAN, RICK ACTORS, ACTRE Flat amount 24.19
WELCH, LATONYA ACTORS, ACTRE Flat amount 24.19
YOAKIM VALLEY PRODUCTION ACTORS, ACTRE Flat amount 665.11
- ------------------------ ------------------------------------- -------------
GROSS WAGES 1,293.98
PAYROLL TAXES FICA 6.20% on $628.87 39.00
PAYROLL TAXES Medicare 1.45% on $628.87 9.10
PAYROLL TAXES FUI 0.80% on $628.87 5.01
PAYROLL TAXES CA SUI 5.40% on $580.50 31.38
PAYROLL TAXES FL SUI 5.40% on $48.37 2.61
SAG PHW 12.50% on $1,293.98 161.73
</TABLE>
<PAGE>
[LETTERHEAD OF CAST & CREW TALENT SERVICES, INC.]
Invoice #333455 (continued) Page 2
HANDLING $4.00 flat X 18 72.00
HANDLING 1.50% on $665.11 9.98
TOTAL FRINGE 330.81
TOTAL AMOUNT DUE $1,624.79
=============
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
04/08/97 Cast & Crew Talent Page 1
4:49 pm -- Employee Fringe Report -- [fringe]
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Batch number: 94100
Invoice number: 333455 Week Ending: 04/05/97
Production Company: 789 GREYSTONE COMMUNICATIONS, INC.
Project: 4 POWER OF ANGELS
ANGELINA, DIANA ###-##-#### M/S: S EXM: 1 YTD GROSS: 176.40 GROSS: 24.19
RES ST: CA WORK ST: CA NET: 22.22
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 24.19 TAXES 3.35 PENSION 3.02
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 24.19 FICA 1.85 HANDLING 4.00
----------------------------
Seq: 70186640 FUI 0.19
Check Date: SUI 1.31 Outstanding Vac 0.00
WkEnd Date: 04/05/97 Outstanding Hol 0.00
Invoice #: 333455
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
------------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 34.56
....................................................................................................................................
BROCK, PHILLIP L. ###-##-#### M/S: S EXM: 1 YTD GROSS: 176.40 GROSS: 24.19
RES ST: CA WORK ST: CA NET: 22.22
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 24.19 TAXES 3.35 PENSION 3.02
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 24.19 FICA 1.85 HANDLING 4.00
----------------------------
Seq: 70186619 FUI 0.19
Check Date: SUI 1.31 Outstanding Vac 0.00
WkEnd Date: 04/05/97 Outstanding Hol 0.00
Invoice #: 333455
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
-------------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 34.56
....................................................................................................................................
BRONSON, KIMBERLI ###-##-#### M/S: S EXM: 1 YTD GROSS: 352.80 GROSS: 48.37
RES ST: FL WORK ST: FL NET: 44.67
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 48.37 TAXES 6.70 PENSION 6.05
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 48.37 FICA 3.70 HANDLING 4.00
----------------------------
Seq: 70186628 FUI 0.39
Check Date: SUI 2.61 Outstanding Vac 0.00
WkEnd Date: 04/05/97 Outstanding Hol 0.00
Invoice #: 333455
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
-------------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 65.12
....................................................................................................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
04/08/97 Cast & Crew Talent Page 2
-- Employee Fringe Report -- [fringe]
====================================================================================================================================
<S> <C> <C> <C> <C>
BUCKNER, INA ###-##-#### M/S: S EXM: 1 YTD GROSS: 176.40 GROSS: 24.19
RES ST: CA WORK ST: CA NET: 22.22
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 24.19 TAXES 3.35 PENSION 3.02
------------------------------------- -------------------- -------------------------------
Chk: 0 Residual 24.19 FICA 1.85 HANDLING 4.00
-------------------------------
Seq: 70186659
Check Date: FUI 0.19 Outstanding Vac 0.00
WkEnd Date: 04/05/97 SUI 1.31 Outstanding Hol 0.00
Invoice #: 333455
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
---------------- ---- ---- ---- ---- ---- ------- ----------
0.00 34.56
....................................................................................................................................
FULLER, WILLIAM ###-##-#### M/S: S EXM: 1 YTD GROSS: 176.40 GROSS: 24.19
RES ST: CA WORK ST: CA NET: 22.22
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 24.19 TAXES 3.35 PENSION 3.02
------------------------------------- -------------------- ----------------------------
Chk: 0 Residual 24.19 FICA 1.85 HANDLING 4.00
----------------------------
Seq: 70186634 FUI 0.19
Check Date: SUI 1.31 Outstanding Vac 0.00
WKEnd Date: 04/05/97 Outstanding Hol 0.00
Invoice #: 333455
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
---------------- ---- ---- ---- ---- ---- ------- ----------
0.00 34.56
....................................................................................................................................
HUTTON, PATRICIA B. ###-##-#### M/S: M EXM: 1 YTD GROSS: 176.40 GROSS: 24.19
RES ST: CA WORK ST: CA NET: 22.22
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 24.19 TAXES 3.35 PENSION 3.02
------------------------------------- -------------------- ----------------------------
Chk: 0 Residual 24.19 FICA 1.85 HANDLING 4.00
----------------------------
Seq: 70186639 FUI 0.19
Check Date: SUI 1.31 Outstanding Vac 0.00
WKEnd Date: 04/05/97 Outstanding Hol 0.00
Invoice #: 333455
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
---------------- ---- ---- ---- ---- ---- ------- ----------
0.00 34.56
....................................................................................................................................
JOHNSON, BOBBY ###-##-#### M/S: S EXM: 1 YTD GROSS: 352.80 GROSS: 48.37
RES ST: CA WORK ST: CA NET: 44.43
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 48.37 TAXES 6.70 PENSION 6.05
------------------------------------- -------------------- ----------------------------
Chk: 0 Residual 48.37 FICA 3.70 HANDLING 4.00
----------------------------
Seq: 70186647 FUI 0.39
Check Date: SUI 2.61 Outstanding Vac 0.00
WKEnd Date: 04/05/97 Outstanding Hol 0.00
Invoice #: 333455
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
---------------- ---- ---- ---- ---- ---- ------- ----------
0.00 65.12
....................................................................................................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
04/08/97 Cast & Crew Talent Page 3
-- Employee Fringe Report -- [fringe]
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
KOVAL, BARBARA A. ###-##-#### M/S: S EXM: 999 YTD GROSS: 352.80 GROSS: 48.37
RES ST: CA WORK ST: CA NET: 44.43
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 48.37 TAXES 6.70 PENSION 6.05
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 48.37 FICA 3.70 HANDLING 4.00
----------------------------
Seq: 70186631 FUI 0.39
Check Date: SUI 2.61 Outstanding Vac 0.00
WkEnd Date: 04/05/97 Outstanding Hol 0.00
Invoice #: 333455
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
------------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 65.12
....................................................................................................................................
LILLY, ROBIN ###-##-#### M/S: S EXM: 1 YTD GROSS: 882.00 GROSS: 72.56
RES ST: CA WORK ST: CA NET: 66.65
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 72.56 TAXES 10.05 PENSION 9.07
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 72.56 FICA 5.55 HANDLING 4.00
----------------------------
Seq: 70186621 FUI 0.58
Check Date: SUI 3.92 Outstanding Vac 0.00
WkEnd Date: 04/05/97 Outstanding Hol 0.00
Invoice #: 333455
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
-------------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 95.68
....................................................................................................................................
MAC GREEVY, THOMAS ###-##-#### M/S: S EXM: 1 YTD GROSS: 352.80 GROSS: 48.37
RES ST: CA WORK ST: CA NET: 44.43
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 48.37 TAXES 6.70 PENSION 6.05
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 48.37 FICA 3.70 HANDLING 4.00
----------------------------
Seq: 70186624 FUI 0.39
Check Date: SUI 2.61 Outstanding Vac 0.00
WkEnd Date: 04/05/97 Outstanding Hol 0.00
Invoice #: 333455
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
-------------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 65.12
....................................................................................................................................
MC MAHON, SHAWNA ###-##-#### M/S: S EXM: 1 YTD GROSS: 48.37 GROSS: 48.37
RES ST: CA WORK ST: CA NET: 44.43
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 48.37 TAXES 6.70 PENSION 6.05
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 48.37 FICA 3.70 HANDLING 4.00
----------------------------
Seq: 70186623 FUI 0.39
Check Date: SUI 2.61 Outstanding Vac 0.00
WkEnd Date: 04/05/97 Outstanding Hol 0.00
Invoice #: 333455
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
-------------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 65.12
....................................................................................................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
04/08/97 Cast & Crew Talent Page 4
-- Employee Fringe Report -- [fringe]
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
MINOR, ROBERT L. ###-##-#### M/S: M EXM: 9 YTD GROSS: 352.80 GROSS: 48.37
RES ST: CA WORK ST: CA NET: 44.43
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 48.37 TAXES 6.70 PENSION 6.05
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 48.37 FICA 3.70 HANDLING 4.00
----------------------------
Seq: 70186648 FUI 0.39
Check Date: SUI 2.61 Outstanding Vac 0.00
WkEnd Date: 04/05/97 Outstanding Hol 0.00
Invoice #: 333455
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
------------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 65.12
....................................................................................................................................
MIRAULT, DON ###-##-#### M/S: S EXM: 1 YTD GROSS: 176.40 GROSS: 24.19
RES ST: CA WORK ST: CA NET: 22.22
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 24.19 TAXES 3.35 PENSION 3.02
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 24.19 FICA 1.85 HANDLING 4.00
----------------------------
Seq: 70186637 FUI 0.19
Check Date: SUI 1.31 Outstanding Vac 0.00
WkEnd Date: 04/05/97 Outstanding Hol 0.00
Invoice #: 333455
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
-------------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 34.56
....................................................................................................................................
MONROE, STEVE ###-##-#### M/S: S EXM: 1 YTD GROSS: 176.40 GROSS: 24.19
RES ST: CA WORK ST: CA NET: 22.22
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 24.19 TAXES 3.35 PENSION 3.02
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 24.19 FICA 1.85 HANDLING 4.00
----------------------------
Seq: 70186655 FUI 0.19
Check Date: SUI 1.31 Outstanding Vac 0.00
WkEnd Date: 04/05/97 Outstanding Hol 0.00
Invoice #: 333455
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
-------------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 34.56
....................................................................................................................................
NEALY, FRANCIS ###-##-#### M/S: S EXM: 1 YTD GROSS: 176.40 GROSS: 24.19
RES ST: CA WORK ST: CA NET: 22.22
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 24.19 TAXES 3.35 PENSION 3.02
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 24.19 FICA 1.85 HANDLING 4.00
----------------------------
Seq: 70186653 FUI 0.19
Check Date: SUI 1.31 Outstanding Vac 0.00
WkEnd Date: 04/05/97 Outstanding Hol 0.00
Invoice #: 333455
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
-------------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 34.56
....................................................................................................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
04/08/97 Cast & Crew Talent Page 5
-- Employee Fringe Report -- [fringe]
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
NELSON, STUART ###-##-#### M/S: S EXM: 1 YTD GROSS: 176.40 GROSS: 24.19
RES ST: CA WORK ST: CA NET: 22.22
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 24.19 TAXES 3.35 PENSION 3.02
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 24.19 FICA 1.85 HANDLING 4.00
----------------------------
Seq: 70186630 FUI 0.19
Check Date: SUI 1.31 Outstanding Vac 0.00
WkEnd Date: 04/05/97 Outstanding Hol 0.00
Invoice #: 333455
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
------------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 34.56
....................................................................................................................................
POWERS, STEFANIE ###-##-#### M/S: EXM: 0 YTD GROSS: 613.20 GROSS: 665.11
YOAKIM VALLEY PRODUCTIONS 95-3755629 RES ST: CA WORK ST: CA NET: 665.11
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 665.11 PENSION 83.14
------------------------------- ----------------------------
Chk: 0 Residual 665.11 HANDLING 9.98
----------------------------
Seq: 70186662
Check Date: Outstanding Vac 0.00
WkEnd Date: 04/05/97 Outstanding Hol 0.00
Invoice #: 333455
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
-------------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 758.23
....................................................................................................................................
SEAMAN, RICK ###-##-#### M/S: M EXM: 9 YTD GROSS: 176.40 GROSS: 24.19
RES ST: CA WORK ST: CA NET: 22.22
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 24.19 TAXES 3.35 PENSION 3.02
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 24.19 FICA 1.85 HANDLING 4.00
----------------------------
Seq: 70186650 FUI 0.19
Check Date: SUI 1.31 Outstanding Vac 0.00
WkEnd Date: 04/05/97 Outstanding Hol 0.00
Invoice #: 333455
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
-------------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 34.56
....................................................................................................................................
WELCH, LATONYA ###-##-#### M/S: S EXM: 1 YTD GROSS: 176.40 GROSS: 24.19
RES ST: CA WORK ST: CA NET: 22.22
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 24.19 TAXES 3.35 PENSION 3.02
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 24.19 FICA 1.85 HANDLING 4.00
----------------------------
Seq: 70186651 FUI 0.19
Check Date: SUI 1.31 Outstanding Vac 0.00
WkEnd Date: 04/05/97 Outstanding Hol 0.00
Invoice #: 333455
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
-------------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 34.56
....................................................................................................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
04/08/97 Cast & Crew Talent Page 6
-- Employee Fringe Report -- [fringe]
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
GRAND TOTAL GROSS: 1,293.98
NET: 1,243.00
EARNINGS 1,293.98 TAXES 87.10 PENSION 161.73
----------------------------- ---------------------------- ----------------------------
Residual 1,293.98 FICA 48.10 HANDLING 81.98
FUI 5.01
SUI 33.99
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
------------ ---- ---- ---- ---- ----- ------------ -------------
0.00 1,624.79
====================================================================================================================================
--- End of Employee Fringe Report ---
====================================================================================================================================
</TABLE>
<PAGE>
[LETTERHEAD OF CAST & CREW TALENT SERVICES, INC.]
GREYSTONE COMMUNICATIONS, INC. Invoice: 333428
ATTN: SHINAAN KRAKOWSKY
4705 LAUREL CANYON BLVD. Date: 04/04/97
5TH FLOOR Terms: C.O.D.
VALLEY VILLAGE, CA 91607 Contact: mel
Client: 789/3
# 1520
Payroll charges for RES.SAG QTR 09/30/95 for week ending 04/05/97.
MYSTERY OF ANGELS
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DUKE, PATTY ACTORS, ACTRE Flat amount 7,652.09
LEBER, JAMES J. ACTORS, ACTRE Flat amount 263.87
- ------------------------------------------------------ ------------- --------------------------------------- ----------------------
GROSS WAGES 7,915.96
PAYROLL TAXES FICA 6.20% on $7,915.96 490.79
PAYROLL TAXES Medicare 1.45% on $7,915.96 114.79
PAYROLL TAXES FUI 0.80% on $5,241.87 41.93
PAYROLL TAXES CA SUI 5.40% on $4,978.00 268.81
PAYROLL TAXES NY SUI 5.40% on $263.87 14.25
SAG PHW 12.50% on $7,915.96 989.46
HANDLING Flat amount 4.00
HANDLING 1.50% on $7,652.09 114.78
TOTAL FRINGE 2,038.84
TOTAL AMOUNT DUE $9,954.80
===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
??? Cast & Crew Talent Page 1
??? -- Employee Fringe Report -- [fringe]
====================================================================================================================================
<S> <C> <C> <C> <C>
Batch number: 94085
Invoice Number: 333428 Week Ending: 04/05/97
Production Company: 789 GREYSTONE COMMUNICATIONS, INC.
Project: 3 MYSTERY OF ANGELS
DUKE, PATTY ###-##-#### M/S: S EXM: 1 YTD GROSS: 1,078.40 GROSS: 7,652.09
RES ST: CA WORK ST: CA NET: 3,757.91
GREYSTONE COMMUNICATIONS, INC. MYSTERY OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 7,652.09 TAXES 894.02 PENSION 956.51
------------------------------------ -------------------- ----------------------------
Chk: 0 Residual 7,652.09 FICA 585.39 HANDLING 114.78
----------------------------
Seq: 70186597 FUI 39.82
Check Date: SUI 268.81 Outstanding Vac 0.00
WKEnd Date: 04/05/97 Outstanding Hol 0.00
Invoice #: 333428
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
-------------- ---- ---- ---- ---- ---- ---------- ---------------
0.00 9,617.40
....................................................................................................................................
LEBER, JAMES J. ###-##-#### M/S: S EXM: 1 YTD GROSS: 194.00 GROSS: 263.87
RES ST: NY WORK ST: NY NET: 214.97
GREYSTONE COMMUNICATIONS, INC. MYSTERY OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 263.87 TAXES 36.55 PENSION 32.98
------------------------------------ -------------------- ----------------------------
Chk: 0 Residual 263.87 FICA 20.19 HANDLING 4.00
----------------------------
Seq: 70186611 FUI 2.11
Check Date: SUI 14.25 Outstanding Vac 0.00
WKEnd Date: 04/05/97 Outstanding Hol 0.00
Invoice #: 333428
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
-------------- ---- ---- ---- ---- ---- ---------- ---------------
0.00 337.40
....................................................................................................................................
GRAND TOTAL GROSS: 7,915.96
NET: 3,972.88
EARNINGS 7,915.96 TAXES 930.57 PENSION 989.49
------------------------------------ -------------------- ----------------------------
Residual 7,915.96 FICA 605.58 HANDLING 118.78
----------------------------
FUI 41.93
SUI 283.06
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
-------------- ---- ---- ---- ---- ---- ---------- ---------------
0.00 9,954.80
====================================================================================================================================
--- End of Employee Fringe Report ---
====================================================================================================================================
</TABLE>
<PAGE>
CAST & CREW RESIDUAL CAST CONFIRMATION REQUEST
- --------------------------------------------------------------------------------
CLIENT: GREYSTONE COMMUNICATIONS INC DATE: 04/08/97
---------------------- -----------------
PRODUCTION: ANGELS 1:MYSTERY OF ANGLES EPISODE:_________________
----------------------
TYPE: QTR 09/30/96 #1512
----------------------
================================================================================
CAST & CREW WILL NEED THE FOLLOWING INFORMATION BEFORE WE CAN COMPLETE THE ABOVE
MENTIONED RESIDUALS:
================================================================================
DEAR SHINAAN,
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HERE IS INVOICE 333428
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IF THERE ARE NO CHANGES, PLEASE SIGN BELOW AND RETURN TO ME.
- --------------------------------------------------------------------------------
FAX (818) 848 - 9484
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WHEN WE RECEIVE THIS FORM AND PAYMENT, CHECKS WILL THEN BE
- --------------------------------------------------------------------------------
PROCESSED.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IF YOU HAVE ANY QUESTIONS, PLEASE CALL ME.
- --------------------------------------------------------------------------------
(818) 848 - 6022
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THANK YOU
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MEL BESHEER
- --------------------------------------------------------------------------------
RESIDUALS
================================================================================
IF THE ENCLOSED WORKSHEET REQUIRES ANY CHANGES PLEASE LIST BELOW:
================================================================================
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
CHANGES REQUESTED BY:______________________________ DATE: _________________
FINAL APPROVAL BY: /s/ Shinaan S. Krakowsky DATE: 4/24/97
--------------------------- ------------------
PROCESS CHECKS?: Yes DATE: 4/24/97
---------------------------------- ------------------
<PAGE>
CAST & CREW RESIDUAL CAST CONFIRMATION REQUEST
- --------------------------------------------------------------------------------
CLIENT: GREYSTONE COMMUNICATIONS INC DATE: 04/08/97
---------------------------- -------------------
PRODUCTION: ANGELS: MYSTERY OF ANGELS EPISODE:___________________
-------------------------
TYPE: NET 2ND RUN #1521
-----------
================================================================================
CAST & CREW WILL NEED THE FOLLOWING INFORMATION BEFORE WE CAN COMPLETE THE ABOVE
MENTIONED RESIDUALS:
================================================================================
DEAR SHINAAN,
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HERE IS INVOICE 333404.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IF THERE ARE NO CHANGES, PLEASE SIGN BELOW AND RETURN TO ME.
- --------------------------------------------------------------------------------
FAX (818) 848 - 9484
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WHEN WE RECEIVE THIS FORM AND PAYMENT, CHECKS WILL THEN BE
PROCESSED.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IF YOU HAVE ANY QUESTIONS, PLEASE CALL ME.
- --------------------------------------------------------------------------------
(818) 848 - 6022
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THANK YOU
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MEL BESHEER
- --------------------------------------------------------------------------------
RESIDUALS
================================================================================
IF THE ENCLOSED WORKSHEET REQUIRES ANY CHANGES PLEASE LIST BELOW:
================================================================================
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
CHANGES REQUESTED BY:_______________________ DATE:_________________
FINAL APPROVAL BY: /s/ Shinaan S. Krakowsky DATE: 4/24/97
-------------------------- -----------------
PROCESS CHECKS?: Yes DATE: 4/24/97
------------------------- -----------------
<PAGE>
[LETTERHEAD OF CAST & CREW TALENT SERVICES, INC.]
GREYSTONE COMMUNICATIONS, INC. INVOICE: 333404
ATTN: SHINAAN KRAKOWSKY
4705 LAUREL CANYON BLVD. Date: 04/04/97
5TH FLOOR Terms: C.O.D.
VALLEY VILLAGE, CA 91607 Contact: mel
Client: 789/3
#1520
Payroll charges for RES.SAG 2ND NET P/T RUN for week ending 04/05/97.
MYSTERY OF ANGELS
<TABLE>
- ----------------------------------------------------------------------------
<S> <C> <C>
DUKE, PATTY ACTORS,ACTRE Flat amount 1,078.40
LEBER, JAMES J. ACTORS,ACTRE Flat amount 194.00
- ------------------------ ------------ ------------------------- -----------
GROSS WAGES 1,272.40
PAYROLL TAXES FICA 6.20% on $1,272.40 78.89
PAYROLL TAXES Medicare 1.45% on $1,272.40 18.45
PAYROLL TAXES FUI 0.80% on $1,272.40 10.18
PAYROLL TAXES CA SUI 5.40% on $1,078.40 58.23
PAYROLL TAXES NY SUI 5.40% on $194.00 10.48
SAG PHW 12.80% on $1,272.40 162.87
HANDLING Flat amount 4.00
HANDLING 1.50% on $1,078.40 16.18
TOTAL FRINGE 359.28
TOTAL AMOUNT DUE $1,631.68
============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
04/08/97 Cast & Crew Talent Page 1
10:55 am -- Employee Fringe Report -- [fringe]
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Batch number: 94070
Invoice Number: 333404 Week Ending: 04/05/97
Production Company: 789 GREYSTONE COMMUNICATIONS, INC.
Project: 3 MYSTERY OF ANGELS
DUKE, PATTY ###-##-#### M/S: S EXM: 1 YTD GROSS: 1,078.40 GROSS: 1,078.40
RES ST: CA WORK ST: CA NET: 711.70
GREYSTONE COMMUNICATIONS, INC. MYSTERY OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 1,078.40 TAXES 149.36 PENSION 138.04
------------------------------------ -------------------- ----------------------------
Chk: 0 Residual 1,078.40 FICA 82.50 HANDLING 16.18
----------------------------
Seq: 70182418 FUI 8.63
Check Date: SUI 58.23 Outstanding Vac 0.00
WKEnd Date: 04/05/97 Outstanding Hol 0.00
Invoice #: 333404
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
-------------- ---- ---- ---- ---- ---- ---------- ---------------
0.00 1,381.98
....................................................................................................................................
LEBER, JAMES J. ###-##-#### M/S: S EXM: 1 YTD GROSS: 194.00 GROSS: 194.00
RES ST: NY WORK ST: NY NET: 163.72
GREYSTONE COMMUNICATIONS, INC. MYSTERY OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 194.00 TAXES 26.87 PENSION 24.83
------------------------------------ -------------------- ----------------------------
Chk: 0 Residual 194.00 FICA 14.84 HANDLING 4.00
----------------------------
Seq: 70182419 FUI 1.55
Check Date: SUI 10.48 Outstanding Vac 0.00
WKEnd Date: 04/05/97 Outstanding Hol 0.00
Invoice #: 333404
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
-------------- ---- ---- ---- ---- ---- ---------- ---------------
0.00 249.70
....................................................................................................................................
GRAND TOTAL GROSS: 1,272.40
NET: 875.42
EARNINGS 1,272.40 TAXES 176.23 PENSION 162.87
------------------------------------ -------------------- ----------------------------
Residual 1,272.40 FICA 97.34 HANDLING 20.18
----------------------------
FUI 10.18
SUI 68.71 Outstanding Vac 0.00
Outstanding Hol 0.00
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
-------------- ---- ---- ---- ---- ---- ---------- ---------------
0.00 1,631.68
====================================================================================================================================
--- End of Employee Fringe Report ---
====================================================================================================================================
</TABLE>
<PAGE>
CAST & CREW RESIDUAL CAST CONFIRMATION REQUEST
- --------------------------------------------------------------------------------
CLIENT: GREYSTONE COMMUNICATIONS INC DATE: 04/08/97
---------------------------- ---------------
PRODUCTION: ANGELS: MYSTERY OF ANGELS EPISODE:_______________
-------------------------
TYPE: 35% FOREIGN BUYOUT #1520
------------------
================================================================================
CAST & CREW WILL NEED THE FOLLOWING INFORMATION BEFORE WE CAN COMPLETE THE ABOVE
MENTIONED RESIDUALS:
================================================================================
DEAR SHINAAN,
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HERE IS INVOICE 333418.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IF THERE ARE NO CHANGES, PLEASE SIGN BELOW AND RETURN TO ME.
- --------------------------------------------------------------------------------
FAX (818) 848 - 9484
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WHEN WE RECEIVE THIS FORM AND PAYMENT, CHECKS WILL THEN BE
- --------------------------------------------------------------------------------
PROCESSED.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IF YOU HAVE ANY QUESTIONS, PLEASE CALL ME.
- --------------------------------------------------------------------------------
(818) 848 - 6022
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THANK YOU
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MEL BESHEER
- --------------------------------------------------------------------------------
RESIDUALS
================================================================================
IF THE ENCLOSED WORKSHEET REQUIRES ANY CHANGES PLEASE LIST BELOW:
================================================================================
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
CHANGES REQUESTED BY:___________________________ DATE: _________________
FINAL APPROVAL BY: /s/ Shinaan S. Krakowsky DATE: 4/24/97
-------------------------- -----------------
PROCESS CHECKS?: Yes DATE: 4/24/97
-------------------------- -----------------
<PAGE>
[LETTERHEAD OF CAST & CREW TALENT SERVICES, INC.]
GREYSTONE COMMUNICATIONS, INC. Invoice: 333418
ATTN: SHINAAN KRAKOWSKY
4705 LAUREL CANYON BLVD. Date: 04/04/97
5TH FLOOR Terms: C.O.D.
VALLEY VILLAGE, CA 91607 Contact: mel
Client: 789/3
Payroll charges for RES.SAG FOREIGN BUYOUT 35% for week ending 04/05/97.
MYSTERY OF ANGELS #1520
<TABLE>
- ------------------------------------------------------------------------------
<S> <C> <C>
DUKE, PATTY ACTORS, ACTRE Flat amount 943.60
LEBER, JAMES J. ACTORS, ACTRE Flat amount 169.75
- ------------------------ ------------- ------------------------- -------------
GROSS WAGES 1,113.35
PAYROLL TAXES FICA 6.20% on $1,113.35 69.02
PAYROLL TAXES Medicare 1,45% on $1,113.35 16.14
PAYROLL TAXES FUI 0.80% on $1,113.35 8.91
PAYROLL TAXES CA SUI 5.40% on $943.60 50.95
PAYROLL TAXES NY SUI 5.40% on $169.75 9.17
SAC PHW 12.80% on $1,113.35 142.51
HANDLING Flat amount 4.00
HANDLING 1.50% on $943.60 14.15
TOTAL FRINGE 314.85
TOTAL AMOUNT DUE $1,428.20
============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
04/08/97 Cast & Crew Talent Page 1
10:55 am -- Employee Fringe Report-- [fringe]
================================================================================================================================
<S> <C> <C> <C> <C> <C>
Batch number: 94078
Invoice Number: 333418 Week Ending:04/05/97
Production Company: 789 GREYSTONE COMMUNICATIONS, INC.
Project: 3 MYSTERY OF ANGELS
DUKE,PATTY ###-##-#### M/S: S EXM: 1 YTD GROSS: 1,078.40 GROSS: 943.60
RES ST: CA WORK ST: CA NET: 638.16
GREYSTONE COMMUNICATIONS, INC. MYSTERY OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 943.60 TAXES 130.68 PENSION 120.78
----------------------------------- ------------------------ -------------------------------
Chk: 0 Residual 943.60 FICA 72.18 HANDLING 14.15
-------------------------------
Seq: 70185047 FUI 7.55
Check Date: SUI 50.95 Outstanding Vac 0.00
WkEnd Date: 04/05/97 Outstanding Hol 0.00
Invoice #: 333418
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
------------------ ---- ---- ---- ---- ---- ------- --------------
0.00 1,209.21
....................................................................................................................................
LEBER, JAMES J. ###-##-#### M/S: S EXM: 1 YTD GROSS: 194.00 GROSS: 169.75
RES ST NY WORK ST: NY NET: 145.34
GREYSTONE COMMUNICATIONS, INC. MYSTERY OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 169.75 TAXES 23.51 PENSION 21.73
------------------------------------ --------------------- -------------------------------
Chk: 0 Residual 169.75 FICA 12.98 HANDLING 4.00
-------------------------------
Seq: 70185046 FUI 1.36
Check Date: SUI 9.17 Outstanding vac 0.00
WkEnd Date: 04/05/97 Outstanding Hol 0.00
Invoice #: 333418
ACCOUNT SER LOC SET INC FREE HOURS AMOUNT
------------------ ---- ---- ---- ---- ---- ------- -------------
0.00 218.99
....................................................................................................................................
GRAND TOTAL GROSS: 1,113.35
NET: 783.50
EARNINGS 1,113.35 TAXES 154.19 PENSION 142.51
------------------------------------ ------------------- ---------------------------------
Residual 1,113.35 FICA 85.16 HANDLING 18.15
---------------------------------
FUI 8.91
SUI 60.12
ACCOUNT SER LOC SET INC FREE HOURS AMOUNT
------------------ ---- ---- ---- ---- ---- -------- ---------------
0.00 1,428.20
====================================================================================================================================
--- End Of Employee Fringe Report ---
====================================================================================================================================
</TABLE>
<PAGE>
CAST & CREW RESIDUAL CAST CONFIRMATION REQUEST
- -------------------------------------------------------------------------------
CLIENT: GREYSTONE COMMUNICATIONS INC DATE: 04/08/97
---------------------------- ------------------------
PRODUCTION : ANGELS: POWER OF ANGELS EPISODE: _______________________
-----------------------
TYPE : 35% FOREIGN BUYOUT # 1522
------------------
===============================================================================
CAST & CREW WILL NEED THE FOLLOWING INFORMATION BEFORE WE CAN COMPLETE THE
ABOVE MENTIONED RESIDUALS:
================================================================================
DEAR SHINAAN,
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HERE IS INVOICE 333452.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IF THERE ARE NO CHANGES, PLEASE SIGN BELOW AND RETURN TO ME.
- --------------------------------------------------------------------------------
FAX (818) 848 - 9484
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WHEN WE RECEIVE THIS FORM AND PAYMENT, CHECKS WILL THEN BE
- --------------------------------------------------------------------------------
PROCESSED.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IF YOU HAVE ANY QUESTIONS, PLEASE CALL ME.
- --------------------------------------------------------------------------------
(818) 848 - 6022
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THANK YOU
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MEL BESHEER
- --------------------------------------------------------------------------------
RESIDUALS
================================================================================
IF THE ENCLOSED WORKSHEET REQUIRES ANY CHANGES PLEASE LIST BELOW:
================================================================================
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
CHANGES REQUESTED BY:_______________________ DATE: _________________________
FINAL APPROVAL BY: /s/ Shinaan S. Krakowsky DATE: 4/24/97
-------------------------- -------------------------
PROCESS CHECKS?: Yes DATE: 4/24/97
------------------------- -------------------------
<PAGE>
[LETTERHEAD OF CAST & CREW TALENT SERVICES, INC.]
GREYSTONE COMMUNICATIONS, INC. Invoice: 333452
ATTN: SHINAAN KRAKOWSKY
4705 LAUREL CANYON BLVD. Date: 04/04/97
5TH FLOOR Terms: C.O.D
VALLEY VILLAGE, CA 91607 Contact: mel
Client: 789/4
Payroll charges for Res.SAG FOREIGN BUYOUT 35% for week ending 05/05/97.
POWER OF ANGELS #1522
<TABLE>
- ------------------------------------------------------------------------------
<S> <C> <C>
ANGELINA, DIANA ACTORS, ACTRE Flat amount 176.40
BROCK, PHILLIP L. ACTORS, ACTRE Flat amount 176.40
BRONSON, KIMBERLI ACTORS, ACTRE Flat amount 352.80
BUCKNER, INA ACTORS, ACTRE Flat amount 176.40
FULLER, WILLIAM ACTORS, ACTRE Flat amount 176.40
HUTTON, PATRICIA B. ACTORS, ACTRE Flat amount 176.40
JOHNSON, BOBBY ACTORS, ACTRE Flat amount 352.80
KOVAL, BARBARA A ACTORS, ACTRE Flat amount 352.80
LILLY, ROBIN ACTORS, ACTRE Flat amount 882.00
MAC GREEVY, THOMAS ACTORS, ACTRE Flat amount 352.80
MINOR, ROBERT L. ACTORS, ACTRE Flat amount 352.80
MIRAULT, DON ACTORS, ACTRE Flat amount 176.40
MONROE, STEVE ACTORS, ACTRE Flat amount 176.40
NEALY, FRANCES ACTORS, ACTRE Flat amount 176.40
NELSON, STUART ACTORS, ACTRE Flat amount 176.40
SEAMAN, RICK ACTORS, ACTRE Flat amount 176.40
WELCH, LATONYA ACTORS, ACTRE Flat amount 176.40
YOAKIM VALLEY PRODUCTION ACTORS, ACTRE Flat amount 613.20
- ------------------------ ------------------------------------- -------------
GROSS WAGES 5,199.60
PAYROLL TAXES FICA 6.20% on $4,586.40 284.37
PAYROLL TAXES Medicare 1.45% on $4,586.40 66.55
PAYROLL TAXES FUI 0.80% on $4,586.40 36.66
PAYROLL TAXES CA SUI 5.40% on $4,233.60 228.66
PAYROLL TAXES FL SUI 5.40% on $352.80 19.05
SAG PHW 12.80% on $5,199.60 665.57
</TABLE>
<PAGE>
[LETTERHEAD OF CAST & CREW TALENT SERVICES,INC.]
Invoice #333452 (continued) Page 2
HANDLING $4.00 flat X 11 44.00
HANDLING 1.50% on $3,259.20 48.00
TOTAL FRINGE 1,393.74
TOTAL AMOUNT DUE $6,593.34
============
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
04/08/97 Cast & Crew Talent Page 1
1:58 pm -- Employee Fringe Report -- [fringe]
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Batch number: 94097
Invoice number: 333452 Week Ending: 05/05/97
Production Company: 789 GREYSTONE COMMUNICATIONS, INC.
Project: 4 POWER OF ANGELS
ANGELINA, DIANA ###-##-#### M/S: S EXM: 1 YTD GROSS: 176.40 GROSS: 176.40
RES ST: CA WORK ST: CA NET: 150.53
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 176.40 TAXES 24.44 PENSION 22.58
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 176.40 FICA 13.50 HANDLING 4.00
----------------------------
Seq: 70185527 FUI 1.41
Check Date: SUI 9.53 Outstanding Vac 0.00
WkEnd Date: 05/05/97 Outstanding Hol 0.00
Invoice #: 333452
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
------------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 227.42
....................................................................................................................................
BROCK, PHILLIP L. ###-##-#### M/S: S EXM: 1 YTD GROSS: 176.40 GROSS: 176.40
RES ST: CA WORK ST: CA NET: 150.53
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 176.40 TAXES 24.44 PENSION 22.58
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 176.40 FICA 13.50 HANDLING 4.00
----------------------------
Seq: 70185527 FUI 1.41
Check Date: SUI 9.53 Outstanding Vac 0.00
WkEnd Date: 05/05/97 Outstanding Hol 0.00
Invoice #: 333452
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
-------------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 227.42
....................................................................................................................................
BRONSON, KIMBERLI ###-##-#### M/S: S EXM: 1 YTD GROSS: 352.80 GROSS: 352.80
RES ST: FL WORK ST: FL NET: 288.18
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 352.80 TAXES 48.86 PENSION 45.16
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 352.80 FICA 26.99 HANDLING 5.29
----------------------------
Seq: 70185516 FUI 2.82
Check Date: SUI 19.05 Outstanding Vac 0.00
WkEnd Date: 05/05/97 Outstanding Hol 0.00
Invoice #: 333452
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
-------------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 452.11
....................................................................................................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
04/08/97 Cast & Crew Talent Page 2
-- Employee Fringe Report -- [fringe]
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
BUCKNER, INA ###-##-#### M/S: S EXM: 1 YTD GROSS: 176.40 GROSS: 176.40
RES ST: CA WORK ST: CA NET: 150.53
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 176.40 TAXES 24.44 PENSION 22.58
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 176.40 FICA 13.50 HANDLING 4.00
----------------------------
Seq: 70185541 FUI 1.41
Check Date: SUI 9.53 Outstanding Vac 0.00
WkEnd Date: 05/05/97 Outstanding Hol 0.00
Invoice #: 333452
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
---------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 227.42
....................................................................................................................................
FULLER, WILLIAM ###-##-#### M/S: S EXM: 1 YTD GROSS: 176.40 GROSS: 176.40
RES ST: CA WORK ST: CA NET: 150.53
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 176.40 TAXES 24.44 PENSION 22.58
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 176.40 FICA 13.50 HANDLING 4.00
----------------------------
Seq: 70185521 FUI 1.41
Check Date: SUI 9.53 Outstanding Vac 0.00
WkEnd Date: 05/05/97 Outstanding Hol 0.00
Invoice #: 333452
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
---------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 227.42
....................................................................................................................................
HUTTON, PATRICIA B. ###-##-#### M/S: M EXM: 1 YTD GROSS: 176.40 GROSS: 176.40
RES ST: CA WORK ST: CA NET: 161.81
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 176.40 TAXES 24.44 PENSION 22.58
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 176.40 FICA 13.50 HANDLING 4.00
----------------------------
Seq: 70185524 FUI 1.41
Check Date: SUI 9.53 Outstanding Vac 0.00
WkEnd Date: 05/05/97 Outstanding Hol 0.00
Invoice #: 333452
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
---------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 227.42
....................................................................................................................................
JOHNSON, BOBBY ###-##-#### M/S: S EXM: 1 YTD GROSS: 352.80 GROSS: 352.80
RES ST: CA WORK ST: CA NET: 280.96
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 352.80 TAXES 48.86 PENSION 45.16
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 352.80 FICA 26.99 HANDLING 5.29
----------------------------
Seq: 70185528 FUI 2.82
Check Date: SUI 19.05 Outstanding Vac 0.00
WkEnd Date: 05/05/97 Outstanding Hol 0.00
Invoice #: 333452
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
---------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 452.11
....................................................................................................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
04/08/97 Cast & Crew Talent Page 3
-- Employee Fringe Report -- [fringe]
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
KOVAL, BARBARA A. ###-##-#### M/S: S EXM: 999 YTD GROSS: 352.80 GROSS: 352.80
RES ST: CA WORK ST: CA NET: 324.05
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 352.80 TAXES 48.86 PENSION 45.16
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 352.80 FICA 26.99 HANDLING 5.29
----------------------------
Seq: 70185519 FUI 2.82
Check Date: SUI 19.05 Outstanding Vac 0.00
WkEnd Date: 05/05/97 Outstanding Hol 0.00
Invoice #: 333452
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
---------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 452.11
....................................................................................................................................
LILLY, ROBIN ###-##-#### M/S: S EXM: 1 YTD GROSS: 882.00 GROSS: 882.00
RES ST: CA WORK ST: CA NET: 604.56
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 882.00 TAXES 122.15 PENSION 112.90
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 882.00 FICA 67.47 HANDLING 13.23
----------------------------
Seq: 70185511 FUI 7.05
Check Date: SUI 47.63 Outstanding Vac 0.00
WkEnd Date: 05/05/97 Outstanding Hol 0.00
Invoice #: 333452
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
---------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 1,130.28
....................................................................................................................................
MAC GREEVY, THOMAS ###-##-#### M/S: S EXM: 1 YTD GROSS: 352.80 GROSS: 352.80
RES ST: CA WORK ST: CA NET: 280.96
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 352.80 TAXES 48.86 PENSION 45.16
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 352.80 FICA 26.99 HANDLING 5.29
----------------------------
Seq: 70185515 FUI 2.82
Check Date: SUI 19.05 Outstanding Vac 0.00
WkEnd Date: 05/05/97 Outstanding Hol 0.00
Invoice #: 333452
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
---------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 452.11
....................................................................................................................................
MINOR, ROBERT L. ###-##-#### M/S: M EXM: 9 YTD GROSS: 352.80 GROSS: 352.80
RES ST: CA WORK ST: CA NET: 324.05
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 352.80 TAXES 48.86 PENSION 45.16
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 352.80 FICA 26.99 HANDLING 5.29
----------------------------
Seq: 70185531 FUI 2.82
Check Date: SUI 19.05 Outstanding Vac 0.00
WkEnd Date: 05/05/97 Outstanding Hol 0.00
Invoice #: 333452
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
---------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 452.11
....................................................................................................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
04/08/97 Cast & Crew Talent Page 4
-- Employee Fringe Report -- [fringe]
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
MIRAULT, DON ###-##-#### M/S: S EXM: 1 YTD GROSS: 176.40 GROSS: 176.40
RES ST: CA WORK ST: CA NET: 150.53
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 176.40 TAXES 24.44 PENSION 22.58
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 176.40 FICA 13.50 HANDLING 4.00
----------------------------
Seq: 70185523 FUI 1.41
Check Date: SUI 9.53 Outstanding Vac 0.00
WkEnd Date: 05/05/97 Outstanding Hol 0.00
Invoice #: 333452
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
------------------- ----- ---- ---- ---- ---- ----------- -----------
0.00 227.42
....................................................................................................................................
MONROE, STEVE ###-##-#### M/S: S EXM: 1 YTD GROSS: 176.40 GROSS: 176.40
RES ST: CA WORK ST: CA NET: 150.53
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 176.40 TAXES 24.44 PENSION 22.58
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 176.40 FICA 13.50 HANDLING 4.00
----------------------------
Seq: 70185538 FUI 1.41
Check Date: SUI 9.53 Outstanding Vac 0.00
WkEnd Date: 05/05/97 Outstanding Hol 0.00
Invoice #: 333452
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
--------------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 227.42
....................................................................................................................................
NEALY, FRANCES ###-##-#### M/S: S EXM: 1 YTD GROSS: 176.40 GROSS: 176.40
RES ST: CA WORK ST: CA NET: 150.53
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 176.40 TAXES 24.44 PENSION 22.58
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 176.40 FICA 13.40 HANDLING 4.00
----------------------------
Seq: 70185536 FUI 1.41
Check Date: SUI 9.53 Outstanding Vac 0.00
WkEnd Date: 05/05/97 Outstanding Hol 0.00
Invoice #: 333452
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
--------------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 227.42
....................................................................................................................................
NELSON, STUART ###-##-#### M/S: S EXM: 1 YTD GROSS: 176.40 GROSS: 176.40
RES ST: CA WORK ST: CA NET: 150.53
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 176.40 TAXES 24.44 PENSION 22.58
------------------------------- ----------------------------- ----------------------------
Chk: 0 Residual 176.40 FICA 13.50 HANDLING 4.00
----------------------------
Seq: 70185518 FUI 1.41
Check Date: SUI 9.53 Outstanding Vac 0.00
WkEnd Date: 05/05/97 Outstanding Hol 0.00
Invoice #: 333452
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
--------------------- ---- ---- ---- ---- ---- ----------- -----------
0.00 227.42
....................................................................................................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
04/08/97 Cast & Crew Talent Page 5
-- Employee Fringe Report -- [fringe]
====================================================================================================================================
<S> <C> <C> <C> <C>
POWERS, STEFANIE ###-##-#### M/S: EXM: 0 YTD GROSS: 613.20 GROSS: 613.20
YOAKIM VALLEY PRODUCTIONS 95-3755629 RES ST: CA WORK ST: CA NET: 613.20
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 613.20 PENSION 78.49
------------------------------------- -------------------------------
Chk: 0 Residual 613.20 HANDLING 9.20
Seq: 70185546 -------------------------------
Check Date: outstanding Vac 0.00
WkEnd Date: 05/05/97 outstanding Hol 0.00
Invoice #: 333452
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
---------------- ---- ---- ---- ---- ---- ------- ----------
0.00 700.89
....................................................................................................................................
SEAMAN, RICK ###-##-#### M/S: M EXM: 9 YTD GROSS: 176.40 GROSS: 176.40
RES ST: CA WORK ST: CA NET: 162.02
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 176.40 TAXES 24.44 PENSION 22.58
------------------------------------- -------------------- ----------------------------
Chk: 0 Residual 176.40 FICA 13.50 HANDLING 4.00
----------------------------
Seq: 70185533 FUI 1.41
Check Date: SUI 9.53 outstanding Vac 0.00
WKEnd Date: 05/05/97 outstanding Hol 0.00
Invoice #: 333452
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
---------------- ---- ---- ---- ---- ---- ------- ----------
0.00 227.42
....................................................................................................................................
WELCH, LATONYA ###-##-#### M/S: S EXM: 1 YTD GROSS: 176.40 GROSS: 176.40
RES ST: CA WORK ST: CA NET: 150.53
GREYSTONE COMMUNICATIONS, INC. POWER OF ANGELS SAG ACTORS, ACTRESSES
EARNINGS 176.40 TAXES 24.44 PENSION 22.58
------------------------------------- -------------------- ----------------------------
Chk: 0 Residual 176.40 FICA 13.50 HANDLING 4.00
----------------------------
Seq: 70185534 FUI 1.41
Check Date: SUI 9.53 outstanding Vac 0.00
WKEnd Date: 05/05/97 outstanding Hol 0.00
Invoice #: 333452
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
---------------- ---- ---- ---- ---- ---- ------- ----------
0.00 227.42
....................................................................................................................................
GRAND TOTAL GROSS: 5,199.60
NET: 4,394.56
EARNINGS 5,199.60 TAXES 635.29 PENSION 665.57
------------------------------------- -------------------- ----------------------------
Residual 5,199.60 FICA 350.92 HANDLING 92.88
----------------------------
FUI 36.66
SUI 247.71
ACCOUNT SER LOC SET INS FREE HOURS AMOUNT
---------------- ---- ---- ---- ---- ---- ------- ----------
0.00 6,593.34
====================================================================================================================================
--- End of Employee Fringe Report ---
====================================================================================================================================
</TABLE>
<PAGE>
GREYSTONE COMMUNICATIONS, INC. Date 04-22-97 Check No. 6294
Vendor: CAST
- --------------------------------------------------------------------------------
Inv Date Inv No. Description Invoice Amt Discount Payment
- --------------------------------------------------------------------------------
04-04-97 333452 ANGELS II (POWER OF ANGELS) 6,593.34 0.00 6,593.34
04-04-97 333455 ANGELS II POWER OF ANGELS 1,449.96 0.00 1,449.96
04-04-97 333418 ANGELS I MYSTERY OF ANGELS 1,428.20 0.00 1,428.20
04-04-97 333404 ANGELS I MYSTERY OF ANGELS 1,631.68 0.00 1,631.68
04-04-97 333428 ANGELS I MYSTERY OF ANGELS 9,797.99 0.00 9,797.99
- --------------------------------------------------------------------------------
[CHEQUE APPEARS HERE]
<PAGE>
May 29, 1997
For valid consideration, receipt of which is hereby acknowledged, Kensington
Lane Entertainment, Inc. and American Artists Film Corporation hereby agree as
follows:
1. Kensington Lane agrees to be bound by the indemnity provisions in favor of
American Artists contained in Paragraphs 5.b)and 5.c) of the agreement dated May
29, 1997 between Greystone Communications, Inc. and American Artists
("Agreement"), solely as it applies to any claims by the Writers Guild of
America.
2. Kensington Lane and American Artists as against each other, each agree to be
bound as Releasing and Released Parties, and otherwise agree to be bound by the
provisions of Paragraph 1, 6, 8, and 9-18 of the Agreement.
Kensington Lane Entertainment, Inc. American Artists Film Corporation
By /s/ Shinaan S. Krakowksy By /s/ J. Eric Van Atta
-------------------------------- -------------------------------
Authorized Officer Authorized Officer
<PAGE>
[LETTERHEAD OF DESMOND TOWEY & ASSOCIATES APPEARS HERE]
LETTER OF AGREEMENT
AMERICAN ARTISTS FILM CORPORATION
DESMOND TOWEY & ASSOCIATES
This document will outline the contractual relationship between American Artists
Film Corporation (AAF) and Desmond Towey & Associates (aka Cameron Towey
Neilson, Inc.) commencing June 18, 1997 through June 17, 1998. During that time
period, Desmond Towey & Associates will provide shareholder relations services
to American Artists Film Corporation in accordance with the attached Preliminary
Investor Relations Program Outline. The fee for this service is $2,500 per
month in cash plus options to acquire 100,000 shares of American Artists Film
Corporation stock at $6.50 per share and exercisable per the option agreement.
The cash portion of the fee is billed monthly in advance on the first day of the
month and is payable within ten (10) business days. A specific stock option
document will be provided within the next thirty days.
Expenses are billed on the fifteenth of the month and are immediately
reimbursable. They include such items as: travel, networking, telephone.
photocopying, and mailing. Special projects which might pertain to acquisition
programs, defense in hostile situations or other special corporate programs,
e.g., annual report, slide presentations will be billed separately as approved
by American Artists Film Corporation. All expenses over $500.00 will
specifically be approved by American Artists Film Corporation.
American Artists Film Corporation agrees to indemnify and hold harmless Desmond
Towey & Associates from and against all losses, claims, damages, expenses,
including reasonable attorneys' fees, or liabilities which it may incur as a
result of the reasonable use of (1) information publicly disclosed by American
Artists Film Corporation, (2) information orally given to Desmond Towey &
Associates by American Artists Film Corporation with intention or
understanding, which may be implied from the context, that the information
will be reproduced or otherwise disseminated by Desmond Towey & Associates or
(3) written information, reports, or data furnished to Desmond Towey &
Associates by American Artists Film Corporation in order for Desmond Towey &
Associates to carry out the services required of it hereunder.
Desmond Towey & Associates agrees to indemnify and hold harmless American
Artists Film Corporation from and against all losses, claims, damages, expenses,
including reasonable attorneys' fees, or liabilities which American Artists Film
Corporation may incur as a result of illegal use of information, reports or data
furnished to it by American Artists Film Corporation.
AGREED AND ACCEPTED FOR:
AMERICAN ARTISTS FILM CORPORATION DESMOND TOWEY & ASSOCIATES
/s/ Steven Brown /s/ J. Desmond Towey
- --------------------------------- -------------------------------
Steven Brown J. Desmond Towey
Chairman & CEO President
6/18/97 6/18/97
- ------------------- --------------------------
Date Date
<PAGE>
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
AMERICAN ARTISTS FILM CORPORATION FIRST BANK OF CHILDERSBURG ACCOUNT #: 5550
1245 FOWLER STREET, NW 120 8TH AVE SW - P O BOX 329 Loan Number 10137734
ATLANTA, GA 30318 CHILDERSBURG, AL 35044 Date July 17, 1997
Maturity Date July 17, 1998
Loan Amount $226,500.00
Renewal of 10137734
BORROWER'S NAME AND ADDRESS LENDER'S NAME AND ADDRESS SS#: 43 1717111
"I" includes each borrower above, "You" means the lender, its successors
jointly and severally. and assigns.
- ---------------------------------------------------------------------------------------------------------------------
For value received, I promise to pay to you, or your order, at your address
listed above the PRINCIPAL sum of TWO HUNDRED TWENTY SIX THOUSAND FIVE HUNDRED
--------------------------------------------
AND NO/100 * * * * * Dollars $226,500.00
- -------------------- ----------
[ ] Single Advance: I will receive all of this principal sum on .
--------------
No additional advances are contemplated under this note.
[X] Multiple Advance: The principal sum shown above is the maximum amount of
principal I can borrow under this note. On JULY 17, 1997 I will receive the
-------------
amount of $200,888.01 and future principal advances are contemplated.
-----------
Conditions: The conditions for future advances are PER CUSTOMER'S REQUEST
------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
[X] Open End Credit: You and I agree that I may borrow up to the maximum
amount of principal more than one time. This feature is subject to all
other conditions and expires on JULY 17, 1998.
-------------
[ ] Closed End Credit: You and I agree that I may borrow up to the maximum
only one time (and subject to all other conditions).
INTEREST: I agree to pay interest on the outstanding principal balance from
JULY 17, 1997 at the rate of 9.500% per year until FIRST CHANGE DATE.
------------- ----- -----------------
[X] Variable Rate: This rate may then change as stated below.
[X] Index Rate: The future rate will be 1.000% OVER the following index
-----------
rate: PRIME RATE AS PRINTED IN THE WALL STREET JOURNAL
------------------------------------------------
[ ] No Index: The future rate will not be subject to any internal or
external index. It will be entirely in your control.
[X] Frequency and Timing: The rate on this note may change as often as
DAILY.
-----
A change in the interest rate will take effect ON THE SAME DAY.
---------------
[X] Limitations: During the term of this loan, the applicable annual
interest rate will not be more than 18.000% or less than 6.000%. The
------ -----
rate may not change more than % each .
---- ---------------
Effect of Variable Rate: A change in the interest rate will have the
following effect on the payments:
[X] The amount of each scheduled payment will change.
[X] The amount of the final payment will change.
[ ] .
----------------------------------------------------------------------
ACCRUAL METHOD: Interest will be calculated on a ACTUAL/365 basis.
----------
POST MATURITY RATE: I agree to pay interest on the unpaid balance of this note
owing after maturity, and until paid in full, as stated below:
[X] on the same fixed or variable rate basis in effect before maturity (as
indicated above).
[ ] at a rate equal to .
----------------------------------------------------
[X] LATE CHARGE: If a payment is made more than 10 days after it is due, I agree
--
to pay a late charge of 5.000% OF THE LATE PAYMENT WITH A MINIMUM OF $0.50
--------------------------------------------------
AND A MAXIMUM OF $100.00.
------------------------
[X] ADDITIONAL CHARGES: In addition to interest, I agree to pay the following
charges which [X] are [ ] are not included in the principal amount above:
$1,500.00 PROCESSING FEE.
------------------------
PAYMENTS: I agree to pay this note as follows:
[X] Interest: I agree to pay accrued interest ON THE 17TH DAY OF EACH THIRD
-----------------------------
MONTH BEGINNING OCTOBER 17, 1997
--------------------------------
[X] Principal: I agree to pay the principal JULY 17, 1998
-------------
[ ] Installments: I agree to pay this note in payments. The first payment
---
will be in the amount of $ and will be due .
---------------- ----------------
A payment of $ will be due thereafter.
---------- --------------------------
The final payment of the entire unpaid balance of principal and interest
will be due .
--------------------------------------------------------------
ADDITIONAL TERMS:
- -----------------------------------
[ ] SECURITY: This note is PURPOSE: The purpose of this loan is
separately secured by (describe BUSINESS: WORKING CAPITAL LINE OF CREDIT
separate document by type and date): ----------------------------------------
SIGNATURES: I AGREE TO THE TERMS OF THIS
(This section is for your internal NOTE (INCLUDING THOSE ON PAGE 2). I have
use. Failure to list a separate received a copy on today's date.
security document does not mean the
agreement will not secure this note.
- -----------------------------------
CAUTION: IT IS IMPORTANT THAT YOU
- ----------------------------------- THOROUGHLY READ THIS CONTRACT BEFORE
DISPOSITION OF FUNDS YOU SIGN IT.
----
- ---------------------- ---------- AMERICAN ARTISTS FILM CORPORATION
Deposited to Account Check ----------------------------------------
Number Number
- ----------------------------------- By: /s/ J. ERIC VAN ATTA
------------------------------------
Signature for Lender J. ERIC VAN ATTA, VICE PRESIDENT
X /s/ Dan W. Cleckler ----------------------------------------
- -----------------------------------
DAN W. CLECKLER
----------------------------------------
- -----------------------------------
(Page 1 of 1)
</TABLE>
<PAGE>
DEFINITIONS: As used on page 1, -[X]- means the terms that apply to this loan
"I," "me" or "my" means each Borrower who signs this note and each other person
or legal entity (including guarantors, endorsers, and sureties.) who agrees to
pay this note (together referred to as "us"). "You" or "your" means the Lender
and its successors and assigns.
APPLICABLE LAW: The law of state of Alabama will govern this note. Any term of
this note which is contrary to applicable law will not be effective, unless the
law permits you and me to agree to such a variation. If any provision of this
agreement cannot be enforced according to its terms, this fact will not affect
the enforceability of the remainder of this agreement. No modification of this
note or any agreement securing this note is affective unless the modification is
in writing and signed by you and me. Time is of the essence in this agreement.
PAYMENTS: Each payment I make on this note will first reduce the amount I owe
you for charges which are neither interest nor principal. The remainder of each
payment will then reduce accrued unpaid interest, and then unpaid principal. If
you and I agree to a different application of payments, we will describe our
agreement on this note. I may prepay a part of, or the entire balance of this
loan without penalty, unless we specify to the contrary on this note. Any
partial prepayment will not excuse or reduce any later scheduled payment until
this note is paid in full (unless, when I make the prepayment, you and I agree
in writing to the contrary).
INTEREST: Interest accrues on the principal remaining unpaid from time to time,
until paid in full. If I receive the principal in more than one advance, each
advance will start to earn interest only when I receive the advance. The
interest rate in effect on this note at any given time will apply to the entire
principal advanced at that time. You and I may provide in this agreement for
accrued interest not paid when due to be added to principal. Notwithstanding
anything to the contrary, I do not agree to pay and you do not intend to charge
any rate of interest that is higher than the maximum rate of interest you could
charge under applicable law for the extension of credit that is agreed to here
(either before or after maturity). If any notice of interest accrual is sent and
is in error, we mutually agree to correct it, and if you actually collect more
interest than allowed by law and this agreement, you agree to refund it to me.
INDEX RATE: The index will serve only as a device for setting the rate on this
note. You do not guarantee by selecting this index, or the margin, that the rate
on this note will be the same rate you charge on any other loans or class of
loans to me or other borrowers.
ACCRUAL METHOD: The amount of interest that I will pay on this loan will be
calculated using the interest rate and accrual method stated on page 1 of this
note. For the purpose of interest calculation, the accrual method will determine
the number of days in a "year." If no accrual method is stated, then you may use
any reasonable accrual method for calculating interest.
POST MATURITY RATE: For purposes of deciding when the "Post Maturity Rate"
(shown on page 1) applies, the term "maturity" means the date of the last
scheduled payment indicated on page 1 of this note or the date you accelerate
payment on the note, whichever is earlier.
SINGLE ADVANCE LOANS: If this is a single advance loan, you and I expect that
you will make only one advance of principal. However, you may add other amounts
to the principal if you make any payments described in the "PAYMENTS BY LENDER"
paragraph below, or if we two have agreed that accrued interest not paid when
due may be added to principal.
MULTIPLE ADVANCE LOANS: If this is a multiple advance loan, you and I expect
that you will make more than one advance of principal. If this is closed end
credit, repaying a part of the principal will not entitle me to additional
credit.
PAYMENTS BY LENDER: If you are authorized to pay, on my behalf, charges I am
obligated to pay (such as property insurance premiums), then you may treat those
payments made by you as advances and add them to the unpaid principal under this
note, or you may demand immediate payment of the charges.
SET-OFF: I agree that you may set off any amount due and payable under this note
against any right I have to receive money from you.
"Right to receive money from you" means:
(1) any deposit account balance I have with you;
(2) any money owned to me on an item presented to you or in your
possession for collection or exchange; and
(3) any repurchase agreement or other nondeposit obligation.
"Any amount due and payable under this note" means the total amount of
which you are entitled to demand payment under the terms of this note at the
time you set off. This total includes any balance the due date for which you
properly accelerate under this note.
If my right to receive money from you is also owned by someone who has
not agreed to pay this note, your right of set-off will apply to my interest in
the obligation and to any other agreement I could withdraw on my sole request or
endorsement. Your right of set-off does not apply to an account or other
obligation where my rights are only as a representative. It also does not apply
to any Individual Retirement Account or other tax-deferred retirement account.
You will not be liable for the dishonor of any check when the dishonor
occurs because you set off this debt against any of my accounts. I agree to hold
you harmless from any such claim arising as a result of your exercise of your
right of set-off.
REAL ESTATE OR RESOURCE SECURITY: If this note is secured by real estate or a
residence that is personal property, the existence of a default and your
remedies for such a default will be determined by applicable law, by the terms
of our separate instrument creating the security interest and, to the extent
that prohibited by law and not contrary to the terms of the separate security
instrument, by the "Default" and "Remedies" paragraphs herein.
DEFAULT: I will be in default if any one or more of the following occur: (1) I
fail to make a payment on time or in the amount due; (2) I fail to keep the
property insured, if required; (3) I fail to pay, or keep any promise, on any
debt or agreement I have with you; (4) any other creditor of mine attempts to
collect any debt I owe him through court proceedings; (5) I die, am declared
incompetent, make an assignment for the benefit of creditors, or become
insolvent (either because my liabilities exceed my assets or I am unable to pay
my debts as they become due); (6) I make any written statement or provide any
financial information that is untrue or inaccurate at the time it was provided;
(7) I do or fail to do something which causes you to believe that you will have
difficulty collecting the amount I owe you; (8) any collateral securing this
note is used in a manner or for a purpose which threatens confiscation by a
legal authority; (9) I change my name or assume an additional name without first
notifying you before making such a change; (10) I fail to plant, cultivate and
harvest crops in due season; (11) any loan proceeds are used for a purpose that
will contribute to excessive erosion of highly erodible land or to the
conversion of wetlands to produce an agricultural commodity, as further
explained in 7 C.F.E. Part 1940, Subpart G, Exhibit M.
REMEDIES: If I am in default on this note you have, but are not limited to, the
following remedies:
(1) You may demand immediate payment of all I owe you under this note
(principal, accrued unpaid interest and other accrued charges).
(2) You may set off this debt against any right I have to the payment of money
from you, subject to the terms of the "Set-off" paragraph herein.
(3) You may demand security, additional security, or additional parties to be
obligated to pay this note on a condition for not using any other remedy.
(4) You may refuse to make advances to me or allow purchases on credit by me.
(5) You may use any remedy you have under state or federal law.
By selecting any one or more of these remedies you do not give up your right to
later use any other remedy. By waiving your right to declare an event to be a
default, you do not waive your right to later consider the event as a default if
it continues or happens again.
COLLECTION COSTS AND ATTORNEY'S FEES: I agree to pay all costs of collection,
herein or any other or similar type of cost if I am in default. In addition, if
you hire an attorney to collect this note, I also agree to pay any fee you incur
with such attorney plus court costs (except where prohibited by law). To the
extent permitted by the United States Bankruptcy Code, I also agree to pay the
reasonable attorney's fees and costs you incur to collect this debt as awarded
by any court exercising jurisdiction under the Bankruptcy Code.
WAIVER: I give up my rights to require you to do certain things. I will not
require you to:
(1) demand payment of amounts due (presentment);
(2) obtain official certification of nonpayment (protest); or
(3) give notice that amounts due have not been paid (notice of dishonor).
I waive any defenses I have based on suretyship or impairment of collateral. To
the extent permitted by law. I also waive all personal property exemptions in
the property securing this loan.
OBLIGATIONS INDEPENDENT: I understand that I must pay this note even if someone
else has also agreed to pay it (or, for example, signing this form or a separate
guarantee of settlement). You may sue me alone, or anyone else who is obligated
on this note, or any number of us together, to collect this note. You may do so
without any notice that it has not been paid (notice of dishonor. You may
without notice release any party to this agreement without releasing any other
party. If you give up any of your rights, with or without notice, it will not
effect my duty to pay this note. Any extension of new credit to any of us, or
renewal of this note by all or less than all of us will not release me from my
duty to pay it. (Of course, you are entitled to only one payment in full.) I
agree that you may at your option extend this note or the debt represented by
this note, or any portion of the note or debt from time to time without limit or
notice and for any term without affecting my liability for payment of the note.
I will not assign my obligation under this agreement without your prior written
approval.
CREDIT INFORMATION: I agree and authorize you to obtain credit information about
me from time to time (for example, by requesting a credit report) and to report
to others your credit experience with me (such as a credit reporting agency). I
agree to provide you, upon request, any financial statement or information you
may deem necessary. I warrant that the financial statements and information I
provide to you are or will be accurate, correct and complete.
NOTICE: Unless otherwise required by law, any notice to me shall be given by
delivering it or by mailing it by first class mail addressed to me at my last
known address. My current address is on page 1. I agree to inform you in writing
of any change in my address. I will give any notice to you by mailing it first
class to your address stated on page 1 of this agreement, or to any other
address that you have designated.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
BORROWER'S INTEREST
DATE OF PRINCIPAL INITIALS PRINCIPAL PRINCIPAL INTEREST INTEREST PAID
TRANSACTION ADVANCE (NOT REQUIRED) PAYMENTS BALANCE RATE PAYMENTS THROUGH
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
/ / $ $ $ % $ / /
- --------------------------------------------------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
- --------------------------------------------------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
- --------------------------------------------------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
- --------------------------------------------------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
- --------------------------------------------------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
- --------------------------------------------------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
- --------------------------------------------------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
- --------------------------------------------------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
- --------------------------------------------------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
- --------------------------------------------------------------------------------------------------------------------------------
/ / $ $ $ % $ / /
- --------------------------------------------------------------------------------------------------------------------------------
(page 2 of 2)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
AMERICAN ARTISTS FILM CORPORATION FIRST BANK OF CHILDERSBURG
1245 FOWLER STREET, NW 120 8TH AVE SW - P O BOX 329
ATLANTA, GA 30318 CHILDERSBURG, AL 35044
Line of Credit No. 7111
BORROWER'S NAME AND ADDRESS LENDER'S NAME AND ADDRESS Date JULY 17, 1997
"I" includes each borrower above, "You" means the lender, its successors Max. Credit Amt. $225,000.00
jointly and severally. and assigns. Loan Ref. No. 10137734
- -----------------------------------------------------------------------------------------------------------------
You have extended to me a line of credit in the
AMOUNT of TWO HUNDRED TWENTY FIVE THOUSAND AND NO/100 , $ 225,000.00 .
-------------------------------------------------------------- ------------------------------------
You will make loans to me from time to time until 2:00 P.M. on JULY 17, 1998. Although the line of credit
expires on that date, I will remain obligated to perform all my duties under this agreement so long as I owe you any money
advanced according to the terms of this agreement, as evidenced by any note or notes I have signed promising to repay these amounts.
This line of credit is an agreement between you and me. It is not intended that any third party receive any benefit from this
agreement, whether by direct payment, reliance for future payment or in any other manner. This agreement is not a letter of credit.
1. AMOUNT: This line of credit is:
[X] OBLIGATORY: You may not refuse to make a loan to me under this line of credit unless one of the following occurs:
a. I have borrowed the maximum amount available to me;
b. This line of credit has expired;
c. I have defaulted on the note (or notes) which show my indebtedness under this line of credit;
d. I have violated any term of this line of credit or any note or other agreement entered into in connection with this line
of credit;
e.
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
.
-----------------------------------------------------------------------------------------------------------------------
[ ] DISCRETIONARY: You may refuse to make a loan to me under this line of credit once the aggregate outstanding advances equal
or exceed $ .
------------------------------------------------------ ------------------------------
Subject to the obligatory or discretionary limitations above, this line of credit is:
[X] OPEN-END (Business or Agricultural only): I may borrow up to the maximum amount of principal more than one time.
[ ] CLOSED-END: I may borrow up to the maximum only one time.
2. PROMISSORY NOTE: I will repay any advances made according to this line of credit agreement as set out in the promissory note. I
signed on JULY 17, 1997, or any note(s) I sign at a later time which represent advances under this agreement. The note(s) set(s)
-------------
out the terms relating to maturity, interest rate, repayment and advances. If indicated on the promissory note, the advances will
be made as follows:
AS PER CUSTOMER'S REQUEST
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
.
-------------------------------------------------------------------------------------------------------------------------------
3. RELATED DOCUMENTS: I have signed the following documents in connection with this line of credit and note(s) entered into in
accordance with this line of credit:
[ ] security agreement dated [ ]
----------------------------------- ---------------------------------------------------
[ ] mortgage dated [ ]
--------------------------------------------- ---------------------------------------------------
[ ] guaranty dated [ ]
--------------------------------------------- ---------------------------------------------------
4. REMEDIES: If I am in default on the note(s) you may:
a. take any action as provided in the related documents;
b. without notice to me, terminate this line of credit;
By selecting any of these remedies you do not give up your right to later use any other remedy. By deciding not to use any
remedy should I default, you do not waive your right to later consider the event a default, if it happens again.
5. COST AND FEES: If you hire an attorney to enforce this agreement I will pay your reasonable attorney's fees, where permitted by
law. I will also pay your court costs and costs of collection, where permitted by law.
6. COVENANTS: For as long as this line of credit is in effect or I owe you money for advances made in accordance with the line of
credit, I will do the following:
a. maintain books and records of my operations relating to the need for this line of credit;
b. permit you or any of your representatives to inspect and/or copy these records;
c. provide to you any documentation requested by you which support the reason for making any advances under this line of credit;
d. permit you to make any advance payable to the seller (or seller and me) of any items being purchased with that advance;
e.
-----------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
7. NOTICES: All notices or other correspondence with me should be sent to my address stated above. The notice or correspondence
shall be effective when deposited in the mail, first class, or delivered to me in person.
8. MISCELLANEOUS: This line of credit may not be changed except by a written agreement signed by you and me. The law of the
state in which you are located will govern this agreement. Any term of this agreement which is contrary to applicable law will
not be effective, unless the law permits you and me to agree to such a variation.
FOR THE LENDER SIGNATURES: I AGREE TO THE TERMS OF THIS LINE OF CREDIT, I HAVE RECEIVED
DWC A COPY ON TODAY'S DATE.
- ------------------------------------------------- AMERICAN ARTISTS FILM CORPORATION
-------------------------------------------------
Title CEO BY: J. Eric Van Atta
-------------------------------------------- ---------------------------------------------
J. ERIC VAN ATTA, VICE PRESIDENT
(Page 1 of 1)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
AMERICAN ARTISTS FILM CORPORATION FIRST BANK OF CHILDERSBURG ACCOUNT #: 5550
120 8TH AVE SW - P O BOX 329 Loan Number 10137734
1245 FOWLER STREET, NW CHILDERSBURG, AL 35044 Date July 10, 1997
ATLANTA, GA 30318 Maturity Date July 10, 1998
Loan Amount $75,750.00
Renewal of
--------------
BORROWER'S NAME AND ADDRESS LENDER'S NAME AND ADDRESS SS#: 43 1717111
"I" includes each borrower above, "You" means the lender, its successors
jointly and severally. and assigns.
- -----------------------------------------------------------------------------------------------------------------
For value received, I promise to pay to You, or your order, at your address listed above the PRINCIPAL sum of
SEVENTY FIVE THOUSAND SEVEN HUNDRED FIFTY AND NO/100************************ Dollars $75,750.00
- ---------------------------------------------------------------------------- ------------------------
[X] Single Advance: I will receive all of this principal sum on JULY 10, 1997. No additional advances are contemplated under this
-------------
note.
[ ] Multiple Advances: The principal sum shown above is the maximum amount of principal I can borrow under this note. On
I will receive the amount of $ and future principal advances are
- ---------------------------------- ---------------------
contemplated.
Conditions: The conditions for future advances are
-------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
[ ] Open End Credit: You and I agree that I may borrow up to the maximum amount of principal more than one time.
This feature is subject to all other conditions and expires on .
--------------------------------------------
[ ] Closed End Credit: You and I agree that I may borrow up to the maximum only one time (and subject to all other
conditions).
INTEREST: I agree to pay interest on the outstanding principal balance from JULY 10, 1997 at the rate of 9.500% per year until
------------- ------
FIRST CHANGE DATE .
-----------------------
[X] Variable Rate: This rate may then change as stated below.
[X] Index Rate: The future rate will be 1.000% OVER the following index rate: PRIME RATE AS PRINTED IN THE WALL
----------- ----------------------------------
STREET JOURNAL.
--------------
[ ] No Index: The future rate will not be subject to any internal or external index. It will be entirely in your control.
[X] Frequency and Timing: The rate on this note may change as often as DAILY .
---------------------------
A change in the interest rate will take effect ON THE SAME DAY .
------------------------
[X] Limitations: During the term of this loan, the applicable annual interest rate will not be more than 18.000% or less
-------
than 6.000%. The rate may not change more than % each .
------ ----------- -----------------------
Effect of Variable Rate: A change in the interest rate will have the following effect on the payments:
[X] The amount of each scheduled payment will change. [X] The amount of the final payment will change.
[ ] .
------------------------------------------------------------------------------------------------------------
ACCRUAL METHOD: Interest will be calculated on a ACTUAL/365 basis.
------------
POST MATURITY RATE: I agree to pay interest on the unpaid balance of this note owing after maturity, and until paid in full,
as stated below:
[X] on the same fixed or variable rate basis in effect before maturity (as indicated above).
[ ] at a rate equal to .
----------------------------------------------------------------------
[X] LATE CHARGE: If a payment is made more than 10 days after it is due, I agree to pay a late charge of 5.000% OF THE
-- -------------
LATE PAYMENT WITH A MINIMUM OF $0.50 AND A MAXIMUM OF $100.00.
--------------------------------------------------------------
[X] ADDITIONAL CHARGES: In addition to interest, I agree to pay the following charges which [X] are [ ] are not included
in the principal amount above: $750.00 PROCESSING FEE.
---------------------
PAYMENTS: I agree to pay this note as follows:
[X] Interest: I agree to pay accrued interest ON THE 10TH DAY OF EACH THIRD MONTH BEGINNING OCTOBER 10, 1997.
--------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
[X] Principal: I agree to pay the principal JULY 10, 1998.
-------------
---------------------------------------------------------------------------------------------------------
[ ] Installments: I agree to pay this note in payments. The first payment to be in the amount of $
------------- ---------
and will be due . A payment of $ will be due
---------------------------- ---------------- -----------------------------
thereafter. The final payment of the entire unpaid balance of
- -----------------------------------------------------
principal and interest will be due .
-----------------------------------------------------------
ADDITIONAL TERMS:
Paid by renewal Date 7/17/97
[ ] SECURITY: This note is separately secured by PURPOSE: The purpose of this loan is BUSINESS: WORKING CAPITAL
(describe separate document by type and date): -----------------------------
SIGNATURES: I AGREE TO THE TERMS OF THIS NOTE (INCLUDING THOSE ON
PAGE 2). I have received a copy on today's date.
(This section is for your internal use. Failure
to list a seperate security document does not mean
the agreement will not secure this rate.
CAUTION . . IT IS IMPORTANT THAT YOU THOROUGHLY READ THIS
DISPOSITION OF FUNDS CONTRACT BEFORE YOU SIGN IT.
----
- --------------------------------- -------------
Deposited to Account Number Check Number AMERICAN ARTISTS FILM CORPORATION
-------------------------------------------------
Signature for Lender
X /s/ Louise Henry BY: /s/ J. Eric Van Atta
- ------------------------------------------------- ---------------------------------------------
LOUIE HENRY J. ERIC VAN ATTA, VICE PRESIDENT
</TABLE>
<PAGE>
KAP-AAFC
PRODUCTION AGREEMENT
This Agreement (the "Agreement"), entered into this ___day of July 1997,
by and between KING ARTHUR PRODUCTIONS, L.L.C. ("KAP") and AMERICAN ARTISTS FILM
CORPORATION ("AAFC").
WITNESSETH:
WHEREAS, KAP owns the rights to a documentary film/television program
called
WINDOWS OF HEAVEN ("WINDOWS"), and
WHEREAS, AAFC is a film production company that regularly produces
documentary film/television programs, and
WHEREAS, KAP and AAFC desire to work together to produce and distribute
the WINDOWS documentary.
NOW, THEREFORE, for and in consideration of the mutual promises,
obligations and agreements contained in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by each party, the parties intending to be and being legally bound,
do hereby agree as follows:
ARTICLE ONE
-----------
PRODUCTION OF WINDOWS
---------------------
1.1 PRODUCTION RESPONSIBILITY OF AAFC. AAFC agrees that it will be
---------------------------------
responsible for the production of the two-hour film/television documentary and
home video called "Windows of Heaven."
1.2 AAFC's COST OF PRODUCTION. AAFC agrees that it will be responsible
-------------------------
for all of the costs associated with the production of WINDOWS, subject to the
provisions contained herein below.
<PAGE>
1.3 REIMBURSEMENT OF PRODUCTION COSTS BY KAP. AAFC agrees to submit to
KAP adequate documentation for all expenses incurred in the production of
WINDOWS. Provided KAP receives in excess of its capital contribution in third
party royalty payments from the sale of rights to WINDOWS, KAP agrees
to reimburse AAFC, from those royalty payments for all its production expenses
incurred in the making of WINDOWS.
ARTICLE TWO
-----------
OWNERSHIP OF WINDOWS OF HEAVEN
------------------------------
The copyright of the Program, and in all material contained therein, is
and shall be jointly owned by KAP and AAFC, subject to the provisions in this
Agreement. AAFC shall be responsible for obtaining all clearances and other
rights necessary in order to deliver WINDOWS to third party broadcasters.
Neither party shall produce or grant to any other party the right to produce any
production based on WINDOWS or any of the material contained in WINDOWS without
the written consent of the other party to this Agreement.
ARTICLE THREE
-------------
INVESTOR FUNDS RAISED BY KAP
----------------------------
KAP has informed AAFC that, by virtue of a private placement offering,
KAP will obtain funds from investors which will be used to produce WINDOWS.
Production of WINDOW as a term and condition in the offering, the investors
shall receive one hundred per cent (100%) of their original investment before
any production costs are reimbursed to AAFC pursuant to Paragraph 1.3 above.
ARTICLE FOUR
------------
DISTRIBUTION OF WINDOWS
-----------------------
KAP and AAFC shall negotiate and enter into a direct marketing agreement
with third parties regarding the broadcast rights, film rights, and home video
rights to WINDOWS. In addition KAP and AAFC shall negotiate and enter into a
direct marketing agreement with a frilfillment house regarding the distribution
of the home video of
<PAGE>
WINDOWS. KAP and AAFC shall have the right and duty to consult with each other
in connection with such negotiations. With regard to any other distribution of
WINDOWS, the parties shall consult with each other and explore all other
distribution opportunities including, but not limited to, foreign, home video,
and free, satellite and cable broadcasts. All prospective distribution
agreements shall be reviewed by KAP and AAFC and shall be subject to the
approval of KAP, which approval shall not be unreasonably withheld or delayed.
Subject to all of the provisions of this Agreement, AAFC shall be responsible
for entering into the distribution agreements with third parties. The parties
shall promptly provide to the other party, a copy of each distribution agreement
as provided herein, and each subsequent draft or modification thereof.
ARTICLE FIVE
------------
DISTRIBUTION OF REVENUES
------------------------
All revenues received shall be applied and paid in the following order
and manner:
1) First, all sums raised by KAP by virtue of its private placement offering
shall be repaid to those investors;
2) Second, all sums spent by AAFC in the production of WINDOWS, including
production costs and out-of-pocket expenses;
3) Third, all remaining sums received pursuant to contracts with third parties
covering the period from June 1, 1997 through December 31, 2000 shall be
divided so: thirty-three (33%) per cent being paid to KAP's private
placement investors, forty-six and one half (46.5) percent being paid to
AAFC, fourteen and one half (14.5) per cent being paid to Arthur Cohen, and
six per cent being paid to Randall Carlson; and
4) Fourth, all remaining sums received pursuant to contracts with third parties
covering the period from January 1, 2001 into the future shall be divided
equally between KAP and AAFC.
ARTICLE SIX
-----------
CREDITS
-------
Credits to the parties shall be provided on all forms of WINDOWS,
including but not
<PAGE>
limited to the video tape, film, laser disk, and computer disk as well as in all
paid advertising and other printed materials in the following form:
"American Artists Film Corporation in Association with King Arthur
Productions, L.L.C."
The credit set forth above shall be provided on separate cards or their
graphic equivalents on the tape in an approximately equal size and with all
other equal characteristics whenever a credit is given. If both KAP and AAFC
logos are used in the closing credits, the KAP logo shall be the last logo
shown. All other credits will be in the customary form and shall be subject to
the approval of both parties, which approval shall not be unreasonably withheld
or delayed.
ARTICLE SEVEN
-------------
MISCELLANEOUS PROVISIONS
------------------------
7.1 NOTICES. Any notice contemplated or required under this agreement
-------
shall be deemed sufficient only if in writing. It shall be deemed made when it
is either hand delivered to the party or deposited in the United States Mail as
Certified mail, Return Receipt Requested, with sufficient postage prepaid, and
addressed to the party entitled thereto at the address shown herein for AAFC to
Rex Hauck, American Artists Film Corporation, 1245 Fowler Street, N.W., Atlanta,
Georgia 30308 or if for KAP to Arthur Cohen, King Arthur Productions, 544 N.
Angiers Avenue, N.E., Atlanta, Georgia 30309. Such notice shall also be deemed
complete when actually received by whatever means.
7.2 REMEDIES FOR BREACH. The parties hereto agree that any controversy
-------------------
or claim arising out of or relating to this Agreement, or the breach of this
Agreement, shall be settled by arbitration in accordance with the commercial
arbitration rules of the American Arbitration Association in Atlanta, Georgia,
and judgment on the award rendered by the arbitrators may be entered in any
court having jurisdiction thereof. The costs and expenses of arbitration,
including the fees of the arbitrators, shall be borne by the losing party or in
such proportions as the arbitrators shall determine.
7.3 ENTIRE AGREEMENT. This Agreement contains the entire agreement of
----------------
the parties with respect to the matters covered by this Agreement. No other
agreement, statement, or promise made by any party, or by any employee or member
of any party, that is not contained in this Agreement shall be binding or
valid.
7.4 VALIDITY AND SEVERABILITY. If any provision of this Agreement is
-------------------------
held by a
<PAGE>
court of competent jurisdiction to be invalid or unenforceable for any reason,
the remaining provisions shall remain in full force and effect as if this
Agreement had been executed without the invalid provision.
7.5 GOVERNED BY GEORGIA LAW. This Agreement shall be governed by and
-----------------------
construed in accordance with the laws of the State of Georgia.
7.6 AMENDMENTS. This Agreement shall not be modified or amended except
----------
by a writing properly executed by each party hereto.
7.7 CAPTIONS. Captions of the articles, sections and paragraphs of this
--------
Agreement are for convenience and reference only, and the words contained shall
not be held to modify, amplify, or aid in the interpretatiin of the provisions
of this Agreement.
7.8 ASSIGNABILITY. This Agreement shall be not be assigned, in whole or
-------------
in part, by either party without the prior written consent of the other party.
7.9 COUNTERPARTS. This Agreement may be executed in multiple originals,
------------
each of which shall be deemed an original as long as it is fully executed by
both parties.
IN WITNESS WHEREOF, the parties hereto have subscribed their names the
date and year first above set forth.
AMERICAN ARTISTS FILM CORPORATION
By: /s/ Rex Hauck
--------------------------
Rex Hauck, President
[CORPORATE SEAL]
KING ARTHUR PRODUCTIONS, L.L.C.
By: /s/ Arthur Cohen
----------------------------
Arthur Cohen, Member
<PAGE>
AMERICAN ARTISTS FILM CORPORATION
- --------------------------------------------------------------------------------
SUBSCRIPTION AGREEMENT
American Artists Film Corporation
1245 Fowler Street, N.W.
Atlanta, Georgia 30318
Gentlemen/Ladies:
A. SUBSCRIPTION
The undersigned (the "Subscriber") hereby subscribes for and agrees to
purchase for a total price of $100,000 a Unit comprising:
(i) 36,364 shares of Class A Common Stock ("Common Stock") of American Artists
Film Corporation (the "Company"), a Missouri corporation, and
(ii) A Stock Purchase Warrant to purchase on or before June 30, 2000, up to
37,000 additional shares of Class A Common Stock of the Company, at an
exercise price of $2.80 per share.
The Subscriber submits the following:
(i) The Subscriber's completed and executed Investor Questionnaire; and
(ii) The Subscriber's check for the above purchase price, payable to the order
of American Artists Film Corporation.
B. SUBSCRIBER'S ACKNOWLEDGMENTS AND AGREEMENTS.
The Subscriber understands, acknowledges and agrees that:
1. The Subscriber is an active member of the Board of Directors of the
Company, is fully aware of all material facts concerning the Company, and has
had ample opportunity to question all members of the Company's management.
2. This subscription may be accepted or rejected in whole or in part by
the Company in its sole discretion.
3. This subscription is and shall be irrevocable, except as provided
under applicable state securities laws; provided however, that the Subscriber
shall have no obligation hereunder in the event that the subscription is
declined or the offering canceled.
1
<PAGE>
4. No federal or state agency has made any determination as to the
fairness of this offering for investment purposes, or any recommendation or
endorsement of the shares of Common Stock or the Stock Purchase Warrant.
5. In addition to other applicable restrictions, the Subscriber agrees
not to assign, sell, pledge or otherwise dispose of or transfer any of the
shares of Common Stock or the Stock Purchase Warrant unless registered under the
Securities Act of 1933, as amended (the "1933 Act"), and applicable state
securities laws, or an opinion is given by counsel satisfactory to the Company
that such registration is not required.
C. SUBSCRIBER'S REPRESENTATIONS AND WARRANTIES.
The Subscriber hereby represents and warrants as follows:
1. The Subscriber is acquiring the shares of Common Stock and Stock
Purchase Warrant for the Subscriber's own account for investment, not for the
account of any other person, not for resale to any other person and not with a
view to or in connection with a sale or distribution.
2. All information furnished by the Subscriber in the Subscriber's
Investor Questionnaire is true, correct and complete in all respects.
3. The Subscriber is able to bear the substantial economic risks of an
investment in the Company. The Subscriber has adequate net worth and means of
providing for current needs and personal contingencies to sustain a complete
loss of the Subscriber's investment in the Company, and the Subscriber has no
need for liquidity in this investment.
4. The Subscriber has substantial knowledge and experience in making
investment decisions of this type and is capable of evaluating the merits and
risks of investment.
5. THE SUBSCRIBER IS AN "ACCREDITED INVESTOR" (AS DEFINED IN REGULATION D
PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION UNDER THE 1933 ACT AND AS
INDICATED IN THE INVESTOR QUESTIONNAIRE).
6. The foregoing representations and warranties are true as of this date
and shall be true as of the date the Company issues and sells the shares and
stock purchase warrant to the Subscriber unless the Subscriber notifies the
Company in writing to the contrary prior to that time.
2
<PAGE>
D. MISCELLANEOUS.
This Subscription is made for acceptance in Georgia and shall be governed
by and construed in accordance with the substantive laws of that State.
IN WITNESS WHEREOF, the undersigned has executed this Agreement this 30th
day of August 1997.
/s/ Glen C. Warren
-------------------------------------
Glen C. Warren
ACCEPTANCE
The foregoing subscription is hereby accepted this 3rd day of September
1997.
AMERICAN ARTISTS FILM CORPORATION
By: /s/ J. Eric Van Atta
----------------------------------
Authorized Officer
3
<PAGE>
AMERICAN ARTISTS FILM CORPORATION
- --------------------------------------------------------------------------------
STOCK PURCHASE WARRANT
CLASS A COMMON STOCK
($0.001 Par Value)
- --------------------------------------------------------------------------------
Warrant No. MO-1-17 Number of Shares - 37,000
------- ------
Issued to:
GLEN C. WARREN
10 LAKELAND CIRCLE
JACKSON, MS 39216
THIS CERTIFIES that for value received the above-named holder, or assigns,
is entitled, subject to the terms and conditions hereinafter set forth, to
purchase the number of shares of Class A Common Stock, $0.001 par value per
share, of American Artists Film Corporation (hereinafter called the "Company")
stated above; provided, however, that the number of shares shall be subject to
adjustment upon the occurrence of the contingencies set forth in this Warrant.
The purchase price payable upon the exercise of this Warrant shall be $2.80
per share, the price being hereinafter referred to as the "Warrant Price" and
being subject to adjustments upon the occurrence of the contingencies set forth
in this Warrant.
Upon delivery of this Warrant with the subscription form annexed hereto,
duly executed, together with payment of the Warrant Price for the shares of
Class A Common Stock thereby purchased, at the principal office of the Company,
1245 Fowler Street, N.W., Atlanta, Georgia, 30318, or at such other address as
the Company may designate by notice in writing to the registered holder hereof,
the registered holder of this Warrant shall be entitled to receive a certificate
or certificates for the shares of Class A Common Stock so purchased. All shares
of Class A Common Stock which may be issued upon the exercise of this Warrant
will, upon issuance, be fully-paid and non-assessable and free from all taxes,
liens and charges with respect thereto.
In reliance upon exemptions from registration, this warrant and the shares
of Class A Common Stock issuable upon exercise hereof have not been registered
under the Securities Act of 1933 or under any state law and may not be sold or
transferred except in transactions registered, exempt from registration, or
otherwise in compliance with such Act and applicable state law. All
certificates evidencing shares issued upon exercise hereof shall bear a legend
satisfactory to the Company with respect to restrictions on transfer under
applicable securities laws.
1
<PAGE>
This Warrant is subject to the following terms and conditions:
1. Exercise of Warrant. This Warrant may be exercised in whole at any
-------------------
time, or in part from time to time, at or prior to 5:00 p.m., Atlanta time, June
30, 2000, but not thereafter, as to all or any part of the number of whole
shares of Class A Common Stock then subject thereto. In case of any partial
exercise of this Warrant, the Company shall execute and deliver a new Warrant of
like tenor and date for the balance of the shares of Class A Common Stock
purchasable thereunder.
2. Adjustment of Warrant Price and Number of Shares Purchasable Hereunder.
---------------------------------------------------------------------
In case the Company shall at any time subdivide the outstanding shares of its
Common Stock or issue additional shares of Common Stock of the Company as a
dividend on its Common Stock, the Warrant Price in effect immediately prior to
such subdivision or issuance shall be proportionately decreased, and in case the
Company shall at any time combine the outstanding shares of its Common Stock,
the Warrant Price in effect immediately prior to such combination shall be
proportionately increased, effective from and after the record date of such
subdivision, issuance or combination, as the case may be.
Upon each adjustment pursuant to this paragraph 2, the registered holder of
this Warrant shall thereafter (until another adjustment) be entitled to
purchase, at the adjusted Warrant Price, the number of shares of Class A Common
Stock, calculated to the nearest full share, obtained by (i) multiplying the
number of shares of Class A Common Stock purchasable hereunder immediately prior
to such adjustment by the Warrant Price in effect prior to such adjustment and
(ii) dividing the product so obtained by the adjusted Warrant Price.
3. Reorganization, Reclassification, Consolidation or Merger. If at any
---------------------------------------------------------
time while this Warrant is outstanding there shall be any reorganization or
reclassification of the Common Stock of the Company (other than a subdivision,
issuance or combination of shares provided for in paragraph 2 above) or any
consolidation or merger of the Company with another corporation, the holder of
this Warrant shall thereafter be entitled to receive, during the term hereof and
upon payment of the Warrant Price, the number of shares of stock or other
securities or property of the Company or of the successor corporation resulting
from such consolidation or merger, as the case may be, to which a holder of the
Common Stock of the Company, deliverable upon the exercise of this Warrant,
would have been entitled upon such reorganization, reclassification,
consolidation or merger if this Warrant had been exercised immediately prior to
such reorganization, reclassification, consolidation or merger; and in any such
case, appropriate adjustment (as determined by the Board of Directors of the
Company) shall be made in the application of the provisions herein set forth
with respect to the rights and interest thereafter of the holder of this Warrant
to the end that the provisions set forth herein (including the adjustment of the
Warrant Price and the number of shares issuable upon the exercise of this
Warrant) shall thereafter be applicable, as near as reasonably may be, in
relation to any shares or other property thereafter deliverable upon the
exercise hereof.
2
<PAGE>
4. Notice of Adjustments. Upon any adjustment of the Warrant Price and
---------------------
any increase or decrease in the number of shares of Class A Common Stock
purchasable upon the exercise of this Warrant, then, and in each such case, the
Company within thirty (30) days thereafter shall give written notice thereof to
the registered holder of this Warrant at the address of the holder as shown on
the books of the Company. The notice shall state the Warrant Price as adjusted
and the increased or decreased number of shares purchasable upon the exercise of
this Warrant, setting forth the method of calculation of each.
5. Miscellaneous. (a) The Company covenants that it will at all times
-------------
reserve and keep available, solely for the purpose of issue upon the exercise
hereof, a sufficient number of shares of Class A Common Stock to permit the
exercise hereof in full.
(b) The terms of this Warrant shall be binding upon and shall inure to the
benefit of any successors or assigns of the Company and of the holder or holders
hereof and of the Class A Common Stock issued or issuable upon the exercise
hereof.
(c) No holder of this Warrant, as such, shall be entitled to vote or
receive dividends or be deemed to be a shareholder of the Company for any
purpose.
(d) Except as otherwise provided herein, this Warrant and all rights
hereunder are transferable by the registered holder hereof in person or by duly
authorized attorney on the books of the Company upon surrender of this Warrant,
properly endorsed, to the Company. The Company may deem and treat the
registered holder of this Warrant at any time as the absolute owner hereof for
all purposes and shall not be affected by any notice to the contrary.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officers and its corporate seal to be affixed hereto.
Dated September 3, 1997.
AMERICAN ARTISTS FILM CORPORATION
(CORPORATE SEAL)
ATTEST: By: /s/ Steven D. Brown
---------------------
Chairman of the Board
By: /s/ J. Eric Van Atta
--------------------
Secretary
3
<PAGE>
SUBSCRIPTION FORM
-----------------
(To be Executed by the Registered Holder
to Exercise the Rights to Purchase Class A Common
Stock evidenced by the foregoing Warrant)
TO: AMERICAN ARTISTS FILM CORPORATION
The undersigned hereby exercises the right to purchase
-------------
shares of Class A Common Stock covered by the attached Warrant in accordance
with the terms and conditions thereof, and herewith makes payment of the Warrant
Price of such shares in full.
------------------------------
Signature
------------------------------
------------------------------
Address
Dated: ____________________
4
<PAGE>
AGREEMENT
This agreement is entered into on this _______ day of September, 1997 by and
between Marion Woodman (Woodman), an individual residing in Canada, and the
American Artists Film Corporation (AAF), a company doing business in state of
Georgia.
Recitals
1. Woodman is a published author, lecturer and Jungian expert.
2. - AAF is a development and production company in the business of producing
films and television programs for world wide distribution.
3. - The principals wish to enter into an agreement whereby the original
research, writings and ideas proprietary to Woodman are utilized as the basis to
produce either television programming or a home video series or other media
application, tentatively entitled "Man, Woman and Spirit" and hereafter referred
to as the Program. It is understood that any program produced will attempt to
be exploited in any and all media world wide.
Therefore, it is agreed as follows:
1 - In exchange for the sum of $5000.00, Woodman grants to AAF the exclusive
right to film or video tape a series of conversations to be held at SereneBe
Farms in Atlanta, Georgia on or about October 12th to the 16th.
2 - AAF agrees to use its best efforts to negotiate a licensing arrangement for
a one hour special or series of specials with a broadcast distributor based on
this filming.
3 - Should AAF succeed in securing a broadcast licensing arrangement, Woodman
would then be due a profit participation share of 5% of all profits (to be
defined on the same basis for all parties involved) returned to
AAF from the exploitation of the programming from all media in all markets,
including but not limited to television, home video, syndication, publishing
and multimedia, worldwide in perpetuity.
3A - If the transcripts from these conversations are accepted for publication
through the electronic or standard press then Woodman would receive 25% of any
profits returned to AAF from such publishing. AAF recognizes and agrees that
Lucinda Vardy will act in consult with AAF to determine the appropriate means
for such publication of the material on the video tapes. Lucinda Vardy will act
in any such endeavor on behalf of Woodman.
<PAGE>
4 - Upon the completion of any filming AAF will, in consult with the Episcopal
Media Center, have the sole right to edit, conform or otherwise manipulate the
material in order to effectively seek distribution outlets provided that no
material is taken out of context or in any way misrepresented.
4a - AAF agrees to provide Woodman copies of the paper cut for her review and
comment. AAF will also provide Woodman with a rough cut of the initial program
upon its completion.
4b - No material will be sold or used out of context without Woodman's or her
surrogate's written approval.
5 - AAF shall have the sole right to license any programming or content derived
from the filming into all media worldwide in perpetuity including but not
limited to television, cable, syndication, home video, the Internet, other
electronic media applications, CD-ROM, publishing for print and serialization.
These rights may be assigned to others by AAF to secure distribution at AAF's
discretion so long as any obligations due Woodman on behalf of AAF are honored
as part of these assignations.
6 - The copyright on any programming produced shall be jointly owned by AAF and
the Episcopal Television and Radio Network.
7 - Both parties acknowledge there are no other liens on material and both are
free to enter into this agreement.
8 - Any disagreement shall be arbitrated in the state of Georgia.
9 - Both parties acknowledge that this agreement may be commemorated in a longer
form contract at some date in the future.
If the preceding signifies your understanding of the agreement indicate so by
signing below.
/s/ Rex Hauck October 17, 1997
- ----------------------------- ------------------
American Artists
/s/ Marion Woodman October 17, 1997
- ----------------------------- ------------------
Marion Woodman
<PAGE>
AMERICAN ARTIST FILM CORPORATION
- --------------------------------------------------------------------------------
1245 Fowler Street, N.W. . Atlanta, GA 30318 . (404)876-7373 . FAX (404)885-9831
A G R E E M E N T
THIS AGREEMENT is made and entered into this 18th day of August 1997 by and
between The Episcopal Media Center (EMC) and the American Artists Film
Corporation (AAF), a corporation doing business in the state of Georgia.
R E C I T A L S
1 - AAF is a development and production company in the business of producing
feature length motion pictures and video and television programs for worldwide
distribution in all media.
2 - EMC is a non-profit organization with certain ties to Robert Johnson and
Marion Woodman, experts and authors in the fields of Jungian psychology,
mythology and dream interpretation.
3 - AAF and EMC wish to enter into an agreement to produce a series of videos
featuring the ideas and opinions of Robert Johnson and Marion Woodman.
A G R E E D
1 - AAF agrees to provide all production services, including but not limited to
Producer/director,writer, cameramen, camera and lighting equipment, technical
support and sound recording for a period of five days from October 12th through
October 16th in order to create the programming.
2 - AAF will also seek to market and sell the Program to appropriate media
outlets, including but not limited to public television, syndication,
international broadcasters, internet services, publishers and other outlets.
3 - EMC will coordinate with Robert Johnson and Marion Woodman to appear in the
program, and provide AAF with notification as to their availability.
4 - Any fees due Robert Johnson and Marion Woodman or any costs associated with
their travel will be paid by EMC or one of their associates.
5 - EMC has also secured through its association with Marie Nygren the use of a
certain location, Serene Be Farms, that is available as a location for the
filming.
<PAGE>
6 - Upon the completion of filming, AAF and EMC will together review the footage
and negotiate the best end use of the material recognizing that different
programs may be edited to accommodate different needs or markets.
7 - AAF agrees to provide EMC the appropriate credit, such as
"Produced in association with ", or "a Production of the Episcopal Radio-TV
Foundation". TV broadcast entities may require we alter the credits to comply
with their standards, AAF and EMC agree to seek mutually agreeable solutions if
necessary.
8 - AAF shall be entitled to the right to produce, release, distribute, exploit
and market the Program in all markets without limitations and to assign these
rights to others as they may so deem. AAF will own 90% of any revenues derived
from such exploitation.
9 - For their contributions, EMC shall own 10% of any profits derived from the
broadcast or exploitation of these programs from any sales or licensing
arrangement in all media worldwide for a period of five years dating from the
date of the first sale.
10 - EMC shall retain the right to sell the program into the "religious" market,
to be defined at a later date.
11 - Should EMC raise any capital that may be required for the post production
phase of the project, EMC and AAF agree to negotiate in good faith a higher
profit position for EMC based on the amount of money raised.
12 - It is acknowledged by both parties that GPTV, the local PBS affiliate, has
shown interest in partnering in this project; AAF and EMC agree to explore this
possibility and to work together to modify this agreement if necessary to allow
for the broadest possible distribution.
12 - Both parties assert that they have the right to enter into this agreement
and that there are no known liens prohibiting against either party.
If the above commemorates your understanding please signify so by signing below.
/s/ Rex Hauck August 19, 1997
_________________________________ _________________
American Film Artists Corporation
/s/ name not legible August 26, 1997
_________________________________ ________________
Episcopal Media Center
President
<PAGE>
[LETTERHEAD OF AMERICAN ARTISTS FILM CORPORATION APPEARS HERE]
AGREEMENT
---------
This agreement is entered into on this 25 day of September, 1997 by and
between Robert Johnson (Johnson), an individual residing in the state of
California, and the American Artists Film Corporation (AAF), a company doing
business in state of Georgia.
Recitals
--------
1. Johnson is a published author, lecturer and Jungian expert.
2. - AAF is a development and production company in the business of producing
films and television programs for world wide distribution.
3. - The principals wish to enter into an agreement whereby the original
research, writings and ideas proprietary to Johnson are utilized as the basis to
produce either television programming or a home video series or other media
application, tentatively entitled "Man, Woman and Spirit" and hereafter referred
to as the Program. It is understood that any program produced will attempt to
be exploited in any and all media world wide.
Therefore, it is agreed as follows:
- ----------------------------------
1 - In exchange for the sum of $5000.00, Johnson grants to AAF the exclusive
right to film or video tape a series of conversations to be held at SereneBe
Farms in Atlanta, Georgia on or about October 12th to the 16th.
2 - AAF agrees to use its best efforts to negotiate a licensing arrangement for
a one hour special or series of specials with a broadcast distributor based on
this filming.
3 - Should AAF succeed in securing a broadcast licensing arrangement, Johnson
would then be due a profit participation share of 5% of all profits returned to
AAF from the exploitation of the programming from all media in all markets,
including but not limited to television, home video, syndication, publishing
and multimedia, worldwide for a period of five years.
3A - If the transcripts from these conversations are accepted for publication
through the electronic or standard press then Johnson would receive 25% of any
profits returned to AAF from such publishing.
<PAGE>
4 - Upon the completion of any filming AAF will, in consult with the Episcopal
Media Center, have the sole right to edit, conform or otherwise manipulate the
material in order to effectively seek distribution outlets provided that no
material is taken out of context or in any way misrepresented.
5 - AAF shall have the sole right to license any programming or content derived
from the filming into all media worldwide in perpetuity including but not
limited to television, cable, syndication, home video, the Internet, other
electronic media applications, CD-ROM, publishing for print and serialization.
These rights may be assigned to others by AAF to secure distribution at AAF's
discretion so long as any obligations due Johnson on behalf of AAF are honored
as part of these assignations.
6 - The copyright on any programming produced shall be jointly owned by AAF and
the Episcopal Television and Radio Network.
7 - Both parties acknowledge there are no other liens on material and both are
free to enter into this agreement.
8 - Any disagreement shall be arbitrated by the laws of the state of Georgia.
9 - Both parties acknowledge that this agreement may be commemorated in a longer
form contract at some date in the future.
If the preceding signifies your understanding of the agreement indicate so by
signing below.
/s/ Rex Hauck September 25, 1997
- ---------------------------- ---------------------
American Artists - President
/s/ Robert A. Johnson September 25, 1997
- ---------------------------- ---------------------
Robert Johnson
<PAGE>
A G R E E M E N T
THIS AGREEMENT is made and entered into this ____ day of September 1997 by and
between Georgia Public Television (GPTC) and the American Artists Film
Corporation (AAF), a corporation doing business in the state of Georgia.
R E C I T A L S
1 - AAF is a development and production company in the business of producing
feature length motion pictures and video and television programs for worldwide
distribution in all media with certain connections to Robert Johnson and Marion
Woodman.
2 - GPTC is an operating division of the Georgia Public Telecommunications
Commission, a public corporation and political instrumentally of the State of
Georgia.
3 - AAF and GPTC wish to enter into an agreement to produce a series of programs
featuring the ideas and opinions of Robert Johnson and Marion Woodman.
A G R E E D
1 - AAF agrees to provide all production services, including but not limited to
Producers, director, writer, and sound recording for a period of five days from
October 12th through October 16th in order to create the programming.
2 - AAF will coordinate with Robert Johnson and Marion Woodman to appear in the
program.
3 - Any fees due Robert Johnson or Marion Woodman or any costs associated with
their travel will be paid by AAF or one of their associates. Their lodging will
be paid by AAF.
4 - AAF has also secured through its association with Marie Nygren the use of a
certain location, SereneBe Farms, that is available as a location for the
filming.
5 - Any hard costs such as tape stock, crew meals, etc. will be paid by AAF.
6 - GPTC agrees to provide the following without direct cash cost to the
production:
a - 3 Beta camera packages for the five days of shooting.
b - Lighting equipment for the same five day period.
c - 2 Camera operators for four days. One camera operator for one additional
day.
d - Offline editing facilities for a period of six weeks.
e - On line editing for a period of four days.
<PAGE>
f - Sound recording and mixing facilities for five days.
7 - Upon the completion of filming, AAF and GPTC will together review the
footage and negotiate the best end use of the material recognizing that
different programs may be edited to accommodate different needs or markets.
8 - AAF and GPTC agree to share the appropriate credit.
9 - AAF shall be entitled to the right to produce, release, distribute, exploit
and market the Program in all markets without limitations and to assign these
rights to others as they may so deem after four airings on GPTV or PBS or after
three years from the first air date.
10 - For their mutual contributions, AAF and GPTC shall own equal shares of any
profits derived from the broadcast or exploitation of these programs from any
sales or licensing arrangements or any derivative or indirect or spin off
products resulting from these programs in all media worldwide.
11 - Production costs will be recouped prior to the disbursement of profits.
GPTC's budget of it's in-kind contribution to the project is attached as Exhibit
A. AAFC's budget of value contributed will be finalized and attached as an
addendum at the completion of editing. No other costs will be allowed as
deductions against profits.
13 - AAF and GPTC will jointly own the program in perpetuity.
14 - Both parties assert that they have the right to enter into this agreement
and that there are no known liens prohibiting against either party.
If the above commemorates your understanding please signify so by signing below.
/s/ Rex Hauck
- --------------------------------- ---------------
American Film Artists Corporation
/s/ Frank Bugg
- --------------------------------- ---------------
Georgia Public Television
<PAGE>
GEORGIA PUBLIC TELECOMMUNICATIONS COMMISSION
PROJECT BUDGET
- --------------------------------------------------------------------------------
PROJECT TITLE: Robert Johnson
PROJECT # DATE: 23-Sep-97
CLIENT:
PRODUCER:GPTV/AAF DEPARTMENT:
PROGRAM LENGTH: One hour AIR DATE:
# OF SHOWS: TBD TIME:
Description of Project:
- --------------------------------------------------------------------------------
|Conversation with Robert Johnson & Marion Woodman to be used as a fund raising|
|program. |
- --------------------------------------------------------------------------------
REVENUE:
Source: Amount:
-------------------------- ------------------
-------------------------- ------------------
-------------------------- ------------------
BUDGET SUMMARY: Direct Cost In-house Cost Total Cost
----------- ------------- ----------
Personnel 0 4,377 4,377
Travel and Expenses 260 260
Other Operating Costs 0 0
In-house Equipment 50,270 50,270
Rental Equipment 0 0
Tape Stock 0 0
Auto Expense 0 0
Talent and Rights 0 0
Telecommunications 0 0
Promotion and Publicity 0
Closed Captioning 0 0
--------------------------------------------------
TOTALS 260 54,647 54,907
APPROVALS:
Producer, GPTV
- ---------------------------
VP Programming, Kent Steele
- ---------------------------
VP Administrative Services, Rick Cramer
- ---------------------------
Deputy Director, Frank Bugg
- ---------------------------
<PAGE>
============================= ===== ======= ===== =========
PRODUCTION STAFF PERSONNEL
- ----------------------------- ----- ------- ----- ---------
Executive Producer(KD) 1 7 DAYS 336 2,352.00
Producer 1 0 DAYS 240 0.00
Director 0 0 DAYS 192 0.00
Producer/Director 0 0 DAYS 240 0.00
Associate Producer 0 0 DAYS 192 0.00
Associate Director 0 0 DAYS 144 0.00
Assistant Producer 0 0 DAYS 0 0.00
Assistant Director 0 0 DAYS 0 0.00
===================================
ENGINEERING STAFF PERSONNEL
- -----------------------------------------------
Tech. Director/Switcher 0 0 DAYS 172 0.00
Lighting Director 0 0 DAYS 172 0.00
Engineer in Charge 0 0 DAYS 240 0.00
Maintenance Engineer 0 0 DAYS 192 0.00
Tape Operator 0 0 DAYS 172 0.00
Audio Operator 0 0 DAYS 172 0.00
Set Designer 0 0 DAYS 144 0.00
Carpenter 0 0 DAYS 144 0.00
Electronic Artist 1 0 DAYS 153 0.00
Videographer 2 4 DAYS 225 1,800.00
Videographer 1 1 DAYS 225 225.00
On-Line Editor 1 0 DAYS 192 0.00
Font Operator 1 0 DAYS 153 0.00
SUBTOTAL 4,377
2,352 (PRODUCTION STAFF)
COMMENTS: 2,025 (ENGINEERING STAFF)
- --------------------------------------------------------------------------------
| |
| |
- --------------------------------------------------------------------------------
PROJECT TITLE: Robert Johnso
<PAGE>
CONSULTANTS PEOP # PER CONTRACT TOTAL
FREELANCE PRODUCTION STAFF:
- ----------------------------- ----- ------- ----- ---------
Executive Producer 0 0 DAYS 0 0.00
Producer 0 0 DAYS 0 0.00
Director 0 0 DAYS 0 0.00
Music Supervisor 0 0 DAYS 0 0.00
Production Assistant 0 0 DAYS 0 0.00
Assistant Producer 0 0 DAYS 0 0.00
Assistant Director 0 0 DAYS 0 0.00
FREELANCE TECHNICAL STAFF:
Videographer 1 0 DAYS 350 0.00
Field Audio 1 0 DAYS 150 0.00
Unit Manager 0 0 DAYS 0 0.00
Engineer in Charge 0 0 DAYS 0 0.00
Camera Operators 0 0 DAYS 100 0.00
Video Operator 0 0 DAYS 200 0.00
Tape Operator 0 0 DAYS 200 0.00
Remote Setup 0 0 DAYS 125 0.00
Cable Puller 0 0 DAYS 75 0.00
Cam-Mate Operator 0 0 DAYS 450 0.00
Audio Director 0 0 DAYS 200 0.00
Audio Assist (A2) 0 0 DAYS 150 0.00
Prompter Operator 0 0 DAYS 100 0.00
Floor Director 0 0 DAYS 125 0.00
Make-up Artist 0 0 DAYS 300 0.00
Driver 0 0 ROUND TRIP 260 0.00
SUBTOTAL 0
0 (Production Consultants)
0 (Engineering Consultants)
COMMENTS:
________________________________________________________________________________
| |
| |
________________________________________________________________________________
PROJECT TITLE: Robert Johnson
<PAGE>
PRODUCTION STAFF TRAVEL
People # PER COST TOTAL
- ----------------------------- ----- ------- ----- ---------
Airline Tickets 0 0 TRIPS 0 0.00
Hotel Room 0 0 DAYS 0 0.00
Meal Per Diem 1 5 DAYS 10 50.00
Mileage/Tolls/Parking 1 5 DAYS 10 50.00
Rental Car 0 0 DAYS 0 0.00
SUBTOTAL 100
ENG. STAFF TRAVEL
People # PER COST TOTAL
- ----------------------------- ----- ------- ----- --------
Airline Tickets 0 0 TRIPS 0 0.00
Hotel Room 0 0 DAYS 0 0.00
Meal Per Diem 2 4 DAYS 10 80.00
Mileage/Tolls/Parking 2 4 DAYS 10 80.00
Rental Car 0 0 DAYS 0 0.00
SUBTOTAL 160
PROD CONSULTANTS TRAVEL
People # PER COST TOTAL
- ----------------------------- ----- ------- ----- ---------
Airline Tickets 0 0 TRIPS 0 0.00
Hotel Room 0 0 DAYS 50 0.00
Meal Per Diem 0 0 DAYS 25 0.00
Mileage/Tolls/Parking 0 0 DAYS 0 0.00
Rental Car 0 0 DAYS 0 0.00
SUBTOTAL 0
ENG. CONSULTANTS TRAVEL
People # PER COST TOTAL
- ----------------------------- ----- ------- ----- ---------
Airline Tickets 0 0 TRIPS 0 0.00
Hotel Room 0 0 DAYS 0 0.00
Meal Per Diem 0 0 DAYS 0 0.00
Mileage/Tolls/Parking 0 0 DAYS 0 0.00
Rental Car 0 0 DAYS 0 0.00
SUBTOTAL 0
TRAVEL TOTAL=
260
- --------------------------------------------
CLOSED CAPTIONING 0 PROGRAM 0 0.00
<PAGE>
INHOUSE
STUDIO AND FIELD EQUIPMENT
UNITS # PER COST TOTAL
- ----------------------------- ----- ------- ----- ---------
REMOTE TRUCK 0 DAYS 1,200 0.00
STUDIO COMPLETE PKG 0 DAYS 3,000 0.00
STUDIO BARE 0 DAYS 480 0.00
TV CONTROL ROOM 0 DAYS 192 0.00
AUDIO POST SUITE 5 DAYS 250 1,250.00
IKEGAMI 357 0 0 DAYS 600 0.00
IKEGAMI 79 0 0 DAYS 600 0.00
IKEGAMI SP55 3 5 DAYS 900 13,500.00
IKEGAMI 730A 0 0 DAYS 300 0.00
BETA 3 CAMERA 0 0 DAYS 600 0.00
1 INCH VTR 0 0 DAYS 600 0.00
3/4" VCR 0 0 DAYS 120 0.00
BETA SP VCR 0 0 DAYS 600 0.00
1/2" VHS 0 0 DAYS 72 0.00
1" EDIT SUITE 0 DAYS 2,880 0.00
SP EDIT SUITE 4 DAYS 2,880 11,520.00
SP EDIT STATION 30 DAYS 720 21,600.00
BETA STATION 0 DAYS 240 0.00
3/4" EDIT STATION 0 DAYS 180 0.00
AURORA 0 DAYS 180 0.00
COLOR GRAPHICS 5 DAYS 480 2,400.00
CHYRON 0 DAYS 600 0.00
VIDIFONT 0 DAYS 96 0.00
3M 0 DAYS 144 0.00
BETA SP55 DECK 0 DAYS 360 0.00
INTERACTIVE TELEPHONES 0 HOURS 90 0.00
SUBTOTAL 50,270
EQUIPMENT - RENTAL/BUY # PER COST TOTAL
- ----------------------------- ----- ------- ----- ---------
SET MATERIAL ESTIMATE 0 FLAT 0 0.00
RENTAL FURNITURE 0 DAYS 0 0.00
PROPS 0 DAYS 0 0.00
RENTAL JIB ARM 0 DAYS 25 0.00
PURCHASE FILTERS 0 FILTERS 0 0.00
RENTAL 0 AMOUNT 0 0.00
CAM MATE SYSTEM 0 DAYS 0 0.00
OTHER 0 DAYS 0 0.00
SUBTOTAL 0
COMMENTS:
________________________________________________________________________________
| |
| |
________________________________________________________________________________
PROJECT TITLE: Robert Johnson
<PAGE>
TAPE STOCK # PER COST TOTAL
- ----------------------------- ----- ------- ----- ---------
120 MINUTE 1" 0 EACH 144 0.00
90 MINUTE 1" 0 EACH 90 0.00
60 MINUTE 1" 5 EACH 54 0.00
30 MINUTE 1" 5 EACH 42 0.00
90 MINUTE BETA SP 0 EACH 54 0.00
60 MINUTE BETA SP 0 EACH 36 0.00
30 MINUTE BETA SP 0 EACH 30 0.00
30 MINUTE BETA SP FIELD 0 EACH 30 0.00
160 MINUTE VHS 0 EACH 6 0.00
120 MINUTE VHS 0 EACH 4 0.00
60 MINUTE VHS 0 EACH 4 0.00
30 MINUTE VHS 0 EACH 3 0.00
60 MINUTE 3/4" 0 EACH 18 0.00
30 MINUTE 3/4" 0 EACH 13 0.00
20 MINUTE 3/4" 0 EACH 11 0.00
SUBTOTAL 0
TALENT FEES COST TOTAL
- ----------------------------- ----- ------- ----- --------
HOST 0 FEES 0 0.00
COMPOSER 0 FEES 0 0.00
WRITER 0 FEES 0 0.00
NAME 0 FEES 0 0.00
NAME 0 FEES 0 0.00
SUBTOTAL 0
TELECOMMUNICATIONS
- -----------------------------
SATELLITE UPLINK/DOWNLINK 0 FEES 1,500 0.00
SATELLITE TRANSPONDER 0 FEES 0 0.00
TELCO - AUDIO/VIDEO LINES 0 FEES 1,500 0.00
TELCO - TELEPHONE LINES 0 FEES 327 0.00
OTHER 0 FEES 0 0.00
SUBTOTAL 0
OTHER OPERATING
EXPENSES UNITS # PER COST TOTAL
- ----------------------------- ----- ------- ----- ---------
PURCHASE FILTERS 0 0 AMOUNT 0 0.00
PURCHASE W/A LENS (1/3) 0 0 AMOUNT 0 0.00
PETTY CASH 0 0 SUM 0 0.00
EQUIPMENT CARTAGE 0 0 DAYS 0 0.00
MUSIC RIGHTS 0 FEES 0 0.00
PHOTOGRAPHIC RIGHTS 0 FEES 0 0.00
TEXT COPYRIGHT 0 FEES 0 0.00
OTHER 0 FEES 0 0.00
SUBTOTAL 0
<PAGE>
$25,000.00 As of October 2, 1996
PROMISSORY NOTE
FOR VALUE RECEIVED, American Artists Film Corporation, a Georgia
corporation (herein called "Obligor"), hereby promises to pay to the order of
Malcolm C. Davenport, V, a resident of Lanett, Alabama (herein called "Holder"),
in legal tender of the United States, without grace, at his office located at
409 West 10th St., West Point, Georgia 31833 or at such other place as the
Holder may hereafter designate, the sum of Twenty-Five Thousand Dollars
($25,000.00) together with simple interest on the unpaid balance of such
principal amount outstanding from time to time hereunder at an annual interest
rate equal to prime plus one percent (1%) per annum. All principal and any
accrued but unpaid interest will be due and payable on demand but no later than
August 1, 1997.
It is hereby expressly agreed that should any default be made in the
payment of principal or interest when due, the principal indebtedness evidenced
hereby and all interest accrued thereon shall, upon written demand, become due
and payable and may be collected forthwith. Notwithstanding any other provision
hereof to the contrary, Obligor shall not be deemed to be in default of payment
of principal or interest hereunder if such payment (the "Late Payment") is
received by Holder within ten (10) days following the date on which Obligor
receives written notice of said default.
Payment not made within ten (10) days of the due date shall bear interest
at the rate of prime plus one percent (1%) per annum from the original due date
until paid.
Time is of the essence of this Note, and in the event that this Note is
collected by law or through an attorney-at-law, the Obligor agrees to pay all
reasonable costs of collection.
This note is unsecured.
The Obligor shall be entitled, at any time, and from time to time, without
the consent of the Holder and without making any penalty or premium therefor, to
prepay all or any portion or portions of the outstanding principal amount
thereof.
This Note shall be governed as to the validity, interpretation,
construction, enforcement, effect, and in all respects by the laws and decisions
of the State of Georgia.
No delay or omission on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of such right or any other rights under this
Note. A waiver on any occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion.
IN WITNESS WHEREOF, the undersigned has caused these presents to be duly
executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ J. Eric Van Atta
---------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ Malcolm C. Davenport, V
- ---------------------------
Malcolm C. Davenport, V
<PAGE>
$25,000.00 As of October 3, 1996
PROMISSORY NOTE
FOR VALUE RECEIVED, American Artists Film Corporation, a Georgia
corporation (herein called "Obligor"), hereby promises to pay to the order of
Glen C. Warren, a resident of Jackson, Mississippi (herein called "Holder"), in
legal tender of the United States, without grace, at his office located at 10
Lakeland Circle, Jackson, Mississippi, or at such other place as the Holder may
hereafter designate, the sum of Twenty-Five Thousand Dollars ($25,000.00)
together with simple interest on the unpaid balance of such principal amount
outstanding from time to time hereunder at an annual interest rate equal to
prime plus one percent (1%) per annum. All principal and any accrued but unpaid
interest will be due and payable on demand but no later than August 1, 1997.
It is hereby expressly agreed that should any default be made in the
payment of principal or interest when due, the principal indebtedness evidenced
hereby and all interest accrued thereon shall, upon written demand, become due
and payable and may be collected forthwith. Notwithstanding any other provision
hereof to the contrary, Obligor shall not be deemed to be in default of payment
of principal or interest hereunder if such payment (the "Late Payment") is
received by Holder within ten (10) days following the date on which Obligor
receives written notice of said default.
Payment not made within ten (10) days of the due date shall bear interest
at the rate of prime plus one percent (1%) per annum from the original due date
until paid.
Time is of the essence of this Note, and in the event that this Note is
collected by law or through an attorney-at-law, the Obligor agrees to pay all
reasonable costs of collection.
This note is unsecured.
The Obligor shall be entitled, at any time, and from time to time, without
the consent of the Holder and without making any penalty or premium therefor, to
prepay all or any portion or portions of the outstanding principal amount
thereof.
This Note shall be governed as to the validity, interpretation,
construction, enforcement, effect, and in all respects by the laws and decisions
of the State of Georgia.
No delay or omission on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of such right or any other rights under this
Note. A waiver on any occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion.
IN WITNESS WHEREOF, the undersigned has caused these presents to be duly
executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ J. Eric Van Atta
---------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ Glen C. Warren
- ------------------
Glen C. Warren
<PAGE>
$25,000.00 As of October 10, 1996
PROMISSORY NOTE
FOR VALUE RECEIVED, American Artists Film Corporation, a Missouri
corporation (herein called "Obligor"), hereby promises to pay to the order of
Martin Howard, a resident of McComb, Mississippi (herein called "Holder"), in
legal tender of the United States, without grace, at his office located at 1311
Aston Avenue, McComb, Mississippi, or at such other place as the Holder may
hereafter designate, the sum of Twenty-Five Thousand Dollars ($25,000.00)
together with simple interest on the unpaid balance of such principal amount
outstanding from time to time hereunder at an annual interest rate equal to
prime plus one percent (1%) per annum. All principal and any accrued but unpaid
interest will be due and payable on demand but no later than August 1, 1997.
It is hereby expressly agreed that should any default be made in the
payment of principal or interest when due, the principal indebtedness evidenced
hereby and all interest accrued thereon shall, upon written demand, become due
and payable and may be collected forthwith. Notwithstanding any other provision
hereof to the contrary, Obligor shall not be deemed to be in default of payment
of principal or interest hereunder if such payment (the "Late Payment") is
received by Holder within ten (10) days following the date on which Obligor
receives written notice of said default.
Payment not made within ten (10) days of the due date shall bear interest
at the rate of prime plus one percent (1%) per annum from the original due date
until paid.
Time is of the essence of this Note, and in the event that this Note is
collected by law or through an attorney-at-law, the Obligor agrees to pay all
reasonable costs of collection.
This note is unsecured.
The Obligor shall be entitled, at any time, and from time to time, without
the consent of the Holder and without making any penalty or premium therefor, to
prepay all or any portion or portions of the outstanding principal amount
thereof.
This Note shall be governed as to the validity, interpretation,
construction, enforcement, effect, and in all respects by the laws and decisions
of the State of Georgia.
No delay or omission on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of such right or any other rights under this
Note. A waiver on any occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion.
IN WITNESS WHEREOF, the undersigned has caused these presents to be duly
executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ J. Eric Van Atta
------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ Martin Howard
- -------------------------
Martin Howard
<PAGE>
$30,000.00 As of June 3, 1997
PROMISSORY NOTE
FOR VALUE RECEIVED, American Artists Film Corporation, a Missouri
corporation (herein called "Obligor"), hereby promises to pay to the order of
Glen C. Warren, a resident of Jackson, Mississippi (herein called "Holder"), in
legal tender of the United States, without grace, at his office located at 10
Lakeland Circle, Jackson, Mississippi, or at such other place as the Holder may
hereafter designate, the sum of Thirty Thousand Dollars ($30,000.00) together
with simple interest on the unpaid balance of such principal amount outstanding
from time to time hereunder at an annual interest rate equal to prime plus one
percent (1%) per annum. All principal and any accrued but unpaid interest will
be due and payable on demand but no later than August 1, 1997.
It is hereby expressly agreed that should any default be made in the
payment of principal or interest when due, the principal indebtedness evidenced
hereby and all interest accrued thereon shall, upon written demand, become due
and payable and may be collected forthwith. Notwithstanding any other provision
hereof to the contrary, Obligor shall not be deemed to be in default of payment
of principal or interest hereunder if such payment (the "Late Payment") is
received by Holder within ten (10) days following the date on which Obligor
receives written notice of said default.
Payment not made within ten (10) days of the due date shall bear interest
at the rate of prime plus one percent (1%) per annum from the original due date
until paid.
Time is of the essence of this Note, and in the event that this Note is
collected by law or through an attorney-at-law, the Obligor agrees to pay all
reasonable costs of collection.
This note is unsecured.
The Obligor shall be entitled, at any time, and from time to time, without
the consent of the Holder and without making any penalty or premium therefor, to
prepay all or any portion or portions of the outstanding principal amount
thereof.
This Note shall be governed as to the validity, interpretation,
construction, enforcement, effect, and in all respects by the laws and decisions
of the State of Georgia.
No delay or omission on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of such right or any other rights under this
Note. A waiver on any occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion.
IN WITNESS WHEREOF, the undersigned has caused these presents to be duly
executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ J. Eric Van Atta
-----------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ Glen C. Warren
- -------------------
Glen C. Warren
<PAGE>
[LETTERHEAD OF AMERICAN ARTISTS FILM CORPORATION APPEARS HERE]
July 17, 1997
Mr. Ben Noble
3261 Lenox Road, N.E.
Atlanta, Georgia 30324
Re: LETTER OF AGREEMENT
-------------------
This letter will confirm the terms and conditions of an unsecured revolving
line of credit, in the amount of $100,000, established in favor of American
Artists Film Corporation ("AAFC"). Borrowings may be made under this agreement
for a period of 365 days, however, any remaining outstanding amounts, with
interest, will be due and payable no later than July 17, 1998. Interest,
calculated at the prime rate plus 1%, will be due and payable on a monthly
basis, no later than the 15th day of each month.
This Letter of Agreement sets forth the terms of this agreement in its
entirety.
Accepted and Agreed to by:
American Artists Film Corporation
/s/ Steven D. Brown
- ---------------------------------
Steven D. Brown, Chairman and CEO
/s/ Ben Noble
- ---------------------------------
Mr. Ben Noble
<PAGE>
AMENDMENT TO PROMISSORY NOTE
DATED AS OF JULY 31, 1997
This notice hereby amends the due date of that certain Promissory Note
dated October 3, 1997 by and between American Artists Film Corporation (therein
called "Obligor") and Glen C. Warren, (therein called "Holder") to August 1,
1998.
IN WITNESS WHEREOF, the undersigned has caused this amendment to be duly
executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ J. Eric Van Atta
--------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ Glen C. Warren
- ---------------------
Glen C. Warren
<PAGE>
AMENDMENT TO PROMISSORY NOTE
DATED AS OF JULY 31, 1997
This notice hereby amends the due date of that certain Promissory Note
dated June 3, 1997 by and between American Artists Film Corporation (therein
called "Obligor") and Glen C. Warren, (therein called "Holder") to August 1,
1998.
IN WITNESS WHEREOF, the undersigned has created this amendment to be
duly executed under the seal on the date and year first above written.
"OBLIGOR"
By: /s/ J Eric Van Atter
-------------------------------------
American Artists Film Corporation
1245 Fowler St., N.W.
Atlanta, Georgia 30318
"HOLDER"
/s/ Glen C. Warren
- -----------------------------
Glen C. Warren
<PAGE>
[LETTERHEAD OF AMERICAN ARTISTS FILM CORPORATION APPEARS HERE]
October 31, 1996
Atlantic International Capital, Ltd.
2200 Corporate Boulevard
Suite 317
Boca Raton, Florida 33431
Attn: Mr. Norman Hoskin, Chairman and
Mr. Richard Iammuno, President
Re: Agreement dated September 27, 1996
This letter will confirm the termination, effective immediately and
without penalty, of such agreement between Atlantic International Capital, Ltd.
and American Artists Film Corporation dated September 27, 1996.
Very Truly,
American Artists Film Corporation
By: /s/ Steven D. Brown
-----------------------
Chief Executive Officer
Acknowledged and Accepted by:
Atlantic International Capital, Ltd.
By: /s/ Richard Iammuno
------------------------
Richard Iammuno
Title: President and CEO
----------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the Company's
consolidated financial statements for the year ended July 31, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> JUL-31-1997
<EXCHANGE-RATE> 1
<CASH> 31,379
<SECURITIES> 0
<RECEIVABLES> 508,837
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 131,860
<DEPRECIATION> 90,667
<TOTAL-ASSETS> 1,413,469
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 6,379
0
0
<OTHER-SE> 168,802
<TOTAL-LIABILITY-AND-EQUITY> 1,413,469
<SALES> 3,890,592
<TOTAL-REVENUES> 3,890,592
<CGS> 3,018,278
<TOTAL-COSTS> 4,365,691
<OTHER-EXPENSES> 90,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,746
<INCOME-PRETAX> (580,845)
<INCOME-TAX> 0
<INCOME-CONTINUING> (580,845)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (580,845)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> 0
</TABLE>
